AMC Entertainment is selling 425 million APE shares according to the movie theatre chain’s recent Form 8-K filings.
CEO Adam Aron advised investors AMC’s Preferred Equity (APE) would provide the company with additional capital to pay down debt at some point during its inception.
I anticipated the company would begin selling shares sometime in Q4 to end the year strong with cash and lower debt.
Alas, AMC Entertainment is doing just that.
“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.
Let’s discuss it below.
Welcome to Franknez.com – if you haven’t joined the newsletter, be sure to do that below. I’m publishing market news and updates daily.
Let’s dive right into it!
Join the newsletter to become part of an activist group fighting for market transparency!
Receive weekly market news and articles like this to stay up to date.
AMC is on Track for Fundamental Growth
The largest movie theatre chain in the world is about to take a leap forward as the company prepares to capitalize from APE.
APE saw gains more than +6% on Monday while AMC was down more than -10%.
Both stocks are seeing some recovery on Tuesday.
On Twitter, shareholders are anticipating a short squeeze, or rally prior to the massive sell.
Afterall, the selloff means APE share prices will fall, but AMC could capitalize on $1.5 billion at current share price levels.
Had the movie theatre chain sold APE during its inception, the company would have enough capital to erase all of its debt.
The company pivoted towards the issuance of APE when shareholders refused to approve the dilution of more AMC shares.
The only solution was to split AMC shares, allowing the company to use its shareholders capital as a cash cow to raise cash without the approval to do so.
And while it’s not 100% confirmed how many shares will be sold, AMC Entertainment does state up to 425 million APE shares may be sold.
Should You Invest in APE?
AMC Entertainment made the following statement:
“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.”
The company warns investors of the significant losses that may occur due to the upcoming selloff.
Conversations have even circulated on Twitter about the possibility of APE getting delisted.
And while the delisting of APE might sound rather extreme, investors should be mindful of how their capital is working for them, if at all.
APE has always been a tool for the company’s fundamental growth rather than an investment tool for retail investors.
Nonetheless, selling APE is going to push AMC forward fundamentally as the movie theatre chain reduces its debt and continues work on increasing its revenue.
I’m curious to know what you think.
Leave your thoughts in the comment section down below.