APE shares have fallen from $7 to the current $2 price.
AMC’s Preferred Equity reached 20.1 million in average volume but has been dropping by nearly half during this market downturn.
Shareholders remain bullish despite the company announcing the sell of up to 425 million shares of APE to pay down its debt.
But is APE merely a fundamental tool to push AMC in the right direction?
Or is it more than that?
Let’s discuss it below!
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APE and Synthetic AMC Shares
APE shares were distributed to AMC shareholder in August.
AMC shareholders received 1 APE share for every 1 AMC share they held.
The theory was that the issuance of APE would unveil synthetic shares in the market, and for a while, some shareholders actually didn’t receive their APE shares on time.
Come to find out, majority of these shareholders were using brokers outside the U.S. which delayed the delivery of the equity.
Adam Aron stated that although he didn’t have any knowledge of synthetic AMC shares, the issuance of these units should at best put the theory to rest.
But AMC’s Preferred Equity has not proven to be the catalyst retail investors hoped for, at least not for a short squeeze that is.
The markets are quite trickier than that, especially what occurs behind the scenes where much information is masked or hidden from the public and even the SEC.
Shareholder sentiment is strong, but many shareholders aren’t happy with the promised ‘pounce’ the CEO announced on Twitter.
A Tool for Retail Investors or AMC Entertainment?
Shareholders holding AMC’s Preferred Equity have suffered losses greater than what AMC stock alone could have.
While AMC stock is owned and decisions are primarily made by shareholders, APE is not.
APE grants AMC Entertainment with access to a large fraction of shareholder’s capital to use at any given moment whether it’s to pay down debt or other fundamental innovations.
For shareholders, purchasing APE shares would mean providing the company with liquidity, charity if you will.
But investing in a company can go two ways:
- You either invest in a company to make money (trade, cash dividends, etc.)
- Or you invest in a company you believe in, betting the value of the company will increase over time and cash out later
It’s important to identify these two types of investments when buying APE shares from AMC Entertainment.
AMC Entertainment has a gameplan and retail investor should too.
Will APE stock go up?
APE stock has the potential to go up, but it also has the potential to get delisted from the market, should it go to zero of course.
AMC released the following statement on APE stock:
“Under the circumstances, we caution you against investing in our AMC Preferred Equity Units, unless you are prepared to incur the risk of losing all or a substantial portion of your investment,” said an official statement from AMC Entertainment.
It’s fair to assess that APE is a tool from which AMC Entertainment can take full advantage of to give them the edge to rise up fundamentally.
The company just announced it is collaborating with Netflix to show its first ever Netflix movie in 200 AMC movie theatres.
While AMC shareholder might not be benefiting so much at the moment, the movie theatre chain sure is.
And as the markets begin to reverse, so will shareholders’ luck.
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Related: How High Can APE Stock Go?