AMC Entertainment Holdings, the popular movie-theater chain, is making some significant changes to its stock structure. The company recently announced plans to implement a reverse 1-for-10 stock split and convert its AMC Preferred Equity unit shares. This move comes after the Delaware Chancery Court approved a revised stock-conversion plan earlier this month.
One of the catalysts for this decision was Wedbush’s upgraded outlook on AMC. The financial services firm raised its price target for the company to $19 from $2 and upgraded the stock to neutral. Wedbush cited the resolution of AMC’s court case as a positive development, which likely influenced their improved assessment.
CEO Adam Aron viewed the court’s approval as a “significant milestone” and acknowledged the liquidity challenges that AMC has faced. With the reverse stock split, AMC’s common share count will be reduced to 52 million, while the APE shares will convert to roughly 100 million AMC shares. This restructuring will allow the company to pave the way for future growth.
Furthermore, as a result of these actions, AMC will now have the authorization to issue up to 550 million additional shares without requiring shareholder approval. This move could potentially bolster the company’s financial flexibility moving forward.
Despite the positive news, AMC shares experienced a significant drop on Wednesday, falling more than 20%. However, by the end of the session, they managed to recover slightly, ending the day down 1.5%. This volatility is reflective of the heavy retail trading activity that took place in AMC, with buy orders outnumbering sell orders by a ratio of 2.5:1.
It’s worth noting that AMC has seen its share price surge recently, enabling the company to raise a substantial $917 million in January 2021. This influx of capital has helped the struggling theater chain face the challenges posed by the COVID-19 pandemic.
Overall, AMC Entertainment Holdings is making strategic moves to navigate the uncertain landscape of the entertainment industry. The reverse stock split and conversion of shares, along with the court’s approval and positive analyst outlook, are all steps in the right direction for the company’s future.
“Travel aficionado. Incurable bacon specialist. Tv evangelist. Wannabe internet enthusiast. Typical creator.”