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APE Surges 45% as AMC Announces Debt Exchange, Reverse Stock Split

Tim Fries

Published: December 24, 2022 7:01 am

APE, AMC’s preferred equity units, jumped by 45% Friday after the cinema chain announced it raised $110 million of fresh capital. The company also announced a debt exchange and proposed a reverse stock split.

AMC Common Shares Down 4.6% in Premarket Following the Announcement

AMC’s APE preferred shares are up 38% after the embattled cinema theater chain made a big announcement involving a capital raise, a debt exchange, and a proposal to convert APE to common AMC shares, which is likely the main reason behind APE’s price jump. Conversely, AMC’s common stock is down more than 4.6% in premarket trading Friday.

The US movie theater chain secured $110 million of fresh equity capital by selling APE preferred equity units to private investment firm Antara Capital, one of AMC’s biggest debt holders. The sale will be completed in two tranches at $0.66 per share, according to the announcement. Furthermore, Antara will also exchange $100 million of AMC notes for around 91 million APE units to cut the company’s annual interest expense by about $10 million.

“Clearly, the existence of APEs has been achieving exactly their intended purposes. They have let AMC raise much-welcomed cash, reduce debt and in so doing deleverage our balance sheet and allow us to explore possible [mergers and acquisition] activity.”

– AMC CEO Adam Aron said in a press release.

Additionally, AMC also proposed a shareholder vote for a reverse stock split of AMC common shares at a 1-to-10 ratio. The company has requested a special shareholder meeting to approve the proposal and convert APE units into AMC common shares.

APE represents a preferred equity unit AMC launched in August 2022 as a special dividend to its shareholders. APE made their public debut on the New York Stock Exchange on August 22, with a share price of $6.95.

The primary goal of launching APE was to help AMC raise enough funding to reduce its massive debt load. However, APE’s price has plummeted substantially since then, resulting in a significant valuation gap between itself and common AMC shares.

AMC Rollercoaster Ride Continues

The announcement indicates that AMC is ramping up efforts to reduce its debt pile, which accumulated during the coronavirus pandemic that forced the company to close almost all its theaters. The past two years have been a rollercoaster for the world’s largest movie theater chain, which saw its price skyrocket in 2021 during the meme-stock craze.

But like most other meme-stocks, the company’s shares saw a steep decline this year. It is currently trading at $4.91 per share, down more than 80% this year.

Earlier this week, AMC said it could not reach an agreement to buy some of the assets of rival cinema chain Cineworld, which filed for bankruptcy in October. The announcement sent AMC’s shares slightly up in premarket trading on Wednesday.

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