AMC Entertainment Stock Is Tumbling: What's Going On?

AMC Entertainment Holdings Inc AMC shares are plunging Thursday morning after the company announced an equity capital raise and a debt for equity exchange.

The company also proposed a vote to convert AMC Preferred Equity Units APE into common shares and enact a reverse stock split. 

What Happened: AMC said it will raise $110 million of new equity capital through the sale of APE units to Antara Capital. The sales are expected to take place in two tranches at a weighted average price of 66 cents per share. 

Antara will also exchange $100 million in second lien notes due 2026 for approximately 91 million APE units, which is expected to reduce AMC's outstanding debt by $100 million.

AMC said it plans to hold a special meeting for shareholders to vote on increasing the number of authorized AMC common shares to permit the conversion of APE units into common shares. 

Shareholders will also be asked to vote on a potential 1-for-10 reverse split, as well as whether to adjust authorized ordinary share capital. If the proposals are adopted, AMC would have the same ability to issue additional common equity as it now has to issue additional APE units.

"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 M&A activity," said Adam Aron, chairman and CEO of AMC.

"However, given the consistent trading discount that we are routinely seeing in the price of APE units compared to AMC common shares, we believe it is in the best interests of our shareholders for us to simplify our capital structure, thereby eliminating the discount that has been applied to the APE units in the market."

AMC Price Action: AMC has a 52-week high of $34.33. The stock is making new 52-week lows on Thursday.

AMC shares are down 25.5% at $3.95 at time of publication, according to Benzinga Pro.

Photo: Paul Sableman from Flickr.