AMC Entertainment CEO Adam Aron announced the possibility of a 1-for-10 reverse stock split.
Shareholders are wondering what this would mean for their investment.
The idea is to give shareholders the illusion of a higher share price by reducing the number of shares they hold.
The value of an individual’s portfolio would remain the same amount.
However, if an investor holds 10 shares of AMC, they will convert to 1 share.
If an investor holds 100 shares of AMC, after a 1-for-10 reverse split they will hold 10 shares.
All for the sake of making the value of AMC shares appear much higher.
With AMC currently trading around $4.90, a 1-for-10 reverse stock split would mean the stock will then trade at $49 per share.
This in turn makes AMC Entertainment less affordable for new retail investors to pick up, yet more attractive now while share prices are this low.
Buying 10 shares of AMC today for $49 will still be worth $49 during the completion of the reverse stock split, except you’ll only own 1 share instead of 10 shares.
CEO Says Shareholders May Convert APE into AMC
Adam Aron said on Twitter that there will be a shareholder vote to convert APE preferred shares into AMC common shares.
“Also, APEs worked exactly as intended to let us raise needed cash, buy back debt, explore M&A. But a huge discount in APE market price vs common stock must be addressed. We’ll hold a shareholder vote. It’s time to convert APE preferred into AMC common to eliminate that discount.”
This will essentially combine APE’s and AMC’s value together.
Is this a smart strategy?
Well, it definitely buys AMC Entertainment time.
Short sellers now have to short AMC from a higher price point and if investors chose to sell their stock, it wouldn’t take AMC to pennies like it could at current levels.
Opinion: Adam Aron is a master at pivoting.
There are no official dates yet to when shareholders will be able to vote on this proposal.
Leave your thoughts below
If you’re a shareholder, leave your thoughts below on these proposals.
Are you for them?
Do you think the CEO is making the best decisions for the company and its shareholders?
Leave a comment for the community to hear your thoughts.
Related: Adam Aron Address Falling APE Shares
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