Short Seller Jim Chanos Buys APE Shares: Why Is He Taking A Long Position In AMC Preferred Equity?

Famed short seller Jim Chanos has announced a long position in AMC Preferred Equity Units APE as part of an arbitrage play. 

What Happened: Chanos announced that he initiated a position in APE shares Tuesday on CNBC's "Fast Money Halftime Report."

The legendary short seller believes the preferred shares should be trading around the same price as AMC Entertainment Holdings Inc AMC common stock.

"We actually bought the new APE preferred and we have shorted the AMC common against it," Chanos said. "They are economically the same security."

AMC declared a special dividend in the form of APE, or AMC Preferred Equity units at the beginning of August. The preferred shares were issued to all common stockholders. AMC Preferred Equity units began trading under the ticker symbol APE on Monday. 

Chanos told CNBC that the two securities function the same, although they are not freely convertible.

"The company can go out now and issue new preferred to finance itself or pay down debt or make acquisitions, but functionally the two securities are the same," he explained. 

"One's at $6 and one's at $10, or wherever they are right now. That spread is economically an arbitrage," Chanos said. "I think they should be the same price or roughly the same price."

See Also: AMC Is Bringing 'Godzilla Vs. Kong' To Theaters For Free To Coincide With APE Share Launch: 'I Prefer Apes Over Lizards'

AMC, APE Price Action: At time of publication Tuesday, AMC Entertainment was down 3.92% at $10.05, while APE units were up 17.33% at $7.04.

Photo: Benzinga file photo by Dustin Blitchok