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AMC Entertainment Holdings: Conversion of Preferred Equity Units


AMC Entertainment Holdings witnessed a decline in stock prices leading up to the long-awaited conversion of preferred equity units to common stock. Last week, the company, known as AMC, stated in a filing with the Securities and Exchange Commission that Thursday, August 24, would mark the final day of trading for AMC Preferred Equity units (APES). As of August 25, APES will no longer be traded, as they will be converted into common stock, resulting in a single class of AMC common shares.

Introduced for trading on the New York Stock Exchange in 2022, APE units were instrumental in helping AMC raise capital to address its debt obligations. Additionally, AMC plans to execute a reverse 1-for-10 split of its common stock on Thursday.

AMC’s shares experienced a significant drop of 24% on Monday, closing at $3.12, marking their lowest level since January 2021. Year-to-date, the stock has declined by 23%, as revealed by Dow Jones Market Data.

To proceed with the conversion of APE units to common stock, AMC had to obtain approval from the Delaware Chancery Court, which has now been granted.

Eric Wold, an analyst at B. Riley Securities, highlighted investor concerns regarding potential dilution resulting from post-transaction equity offerings. However, AMC shares showed a promising increase of about 20% last week. Wold believes that this surge indicates that investors are starting to shift their focus away from immediate dilution concerns and instead recognize the opportunities for AMC to utilize incremental equity to reduce debt significantly and strategically expand into high-growth sectors through acquisitions.

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