AMC (AMC) shares plummeted in early Monday trading, falling nearly 40% as investors feared further dilution of their common stock.
Last weekend, a Delaware court approved a merger between AMC and AMC preferred stock (APE), making all outstanding shares of AMC common stock. In addition, a 1-for-10 reverse stock split is scheduled for Aug. 24, according to an SEC filing, meaning every 10 shares held by an investor now becomes one share, but at a higher value.
APE shares will stop trading on August 25, per fill.
AMC shares have been volatile in recent months as this conversion was initially approved by shareholders in March and then halted in late July. AMC CEO Adam Aron previously said the stock conversion was critical for AMC to have proper cash balances in 2024 and 2025.
“AMC should now be able to raise additional equity,” Aron wrote in a letter to investors on Sunday. “We can use this access to equity to strengthen our cash reserves, pay down debt, invest in growth initiatives to strengthen our operating profitability and pursue transformative M&A opportunities.”
AMC’s stock was up over the past month as a stellar opening weekend for “Barbenheimer,” the combination of “Barbie” and “Oppenheimer,” resulted in AMC’s best single-day performance since before the pandemic. The company has been fighting to bounce back since 2020, when theater attendance declined due to COVID-19-related restrictions.
In its most recent quarter reported Aug. 8, the company’s quarterly revenue of $1.35 billion exceeded analysts’ forecasts of $1.29 billion. The company’s earnings per share of $0.00 also beat Street’s estimates for a loss of $0.04 per share.
The quarter marked the first time the company had not reported an adjusted loss per share since the fourth quarter of 2019. But while AMC’s revenue for the most recent quarter exceeded estimates, it still fell short of revenue for the same quarter. in 2019, prior to the pandemic. disruptions, by about $150 million. In its most recent quarter, AMC saw attendance drop about 30% from the same period in 2019.
“The resolution of the AMC lawsuit removes significant overhang, and we expect AMC and APE shares to converge approximately $3 in conversion (APEs to AMC),” Wedbush analysts Alicia Reese and Michael Pachter wrote in a Monday morning. note. “Despite our positive view of AMC’s recent fundamental performance, we maintain our Underperform rating and $2 price target as stocks continue to trade at a huge premium to their peers.”
Josh Schafer is a reporter for Yahoo Finance.
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