Will going to the movies ever be the same as it was in 2019? The recent troubles at theater chain AMC (NYSE:AMC) suggest otherwise. The company’s recent move to convert its preferred equity units—otherwise known as APEs (NYSE:APE)—into common stock is proving to be much more of a struggle than expected. AMC is down significantly in Tuesday’s trading, but APE is up substantially.
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The latest move features AMC planning a shareholder meeting that will feature three proposals. The first proposal focuses on an increase in the total number of AMC shares. If successful, shares will go from 524,173,073 to 550,000,000. The second proposal seeks to approve a one-for-10 reverse stock split that converts APEs to AMC common stock. The third was more of a procedural matter, allowing for adjournments of the special meeting to get more shareholder votes.
The plan to convert APEs to AMC stock has some surprising support. B.Riley Securities analyst Eric Wold suggested that the move was a huge opportunity to pull in cash. APE unit holders, Wold noted, hold 64% of combined holdings. This makes the proposals ultimately likely to go through. With the movie theater industry starting to come back from the COVID-19 responses that shut down theaters, the ability to raise a lot of cash quickly could give AMC a leg up.
Despite Wold’s enthusiasm, however, Wall Street as a whole doesn’t hold out much hope. Analyst consensus calls AMC stock a Moderate Sell with an average price target of $2.53, implying 49.04% downside risk.
