AMC Entertainment Stock Is Falling While APE Units Rise: What's Going On?

AMC Entertainment Holdings Inc AMC shares are trading lower Monday after the company received court approval for its revised stock conversion plan. AMC Preferred Equity Units APE are moving higher on the news. 

What To Know: In early April, AMC proposed a settlement with shareholders to allow for the conversion of APE units into common shares. The proposed plan also included a one-for-ten reverse stock split.

The court rejected the settlement at the end of July, noting that it could not be approved as submitted. AMC then sent in a revised settlement.

Late Friday, the court approved AMC's revised stock conversion plan. The settlement could reportedly be valued at up to $120 million. 

According to a new regulatory filing, the reverse stock split will take place on Aug. 24. APE units will be converted to common stock the following day, increasing the total number of authorized shares of AMC's Class A common stock from approximately 524.2 million to 550 million.

In a letter to shareholders, AMC CEO Adam Aron said the company's proposal is the "right path" for AMC. 

"We can use this access to equity capital to shore up our cash reserves, pay down debt, invest in growth initiatives to strengthen our operating profitability and pursue transformative merger and acquisition opportunities," Aron said. 

The AMC CEO outlined benefits for the company, including the opportunity to become more resilient and transform the company, the elimination of capital raising inefficiencies, an improved balance sheet and simplified ownership.

"The court ruling on Friday marks a significant milestone for AMC, and I would like to express my deepest appreciation for your unwavering support and trust in the AMC leadership team throughout our journey together. That support and the thoughts of our shareholders have been and will continue to be instrumental in shaping the future of our company," Aron added.

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AMC, APE Price Action: At the time of publication, AMC shares were down 34.8% at $3.42 while APE units were up 17.5% at $2.09, according to Benzinga Pro.

Photo: Paul Sableman from Flickr.