AMC Shareholders Approve ‘APE’ Stock Conversion to Raise Fresh Cash
Shareholders in AMC Entertainment Holdings have voted to allow the parent of AMC Theatres to convert AMC Preferred Equity Units, or so-called APEs, into the company’s common shares.
During a special shareholders meeting held on Tuesday, a preliminary report was announced to indicate the APE conversion proposal passed with 978 million votes, or 88 percent of those cast, OKing the measure, and another 124 million votes, or 11.2 percent, voting against the proposal. Just under one percent of shareholders abstained.
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Shareholders by a similar margin voted yes to a second proposal by AMC to change its share structure by bringing about a reverse split of the company’s common shares at a ratio of 10:1. The wider goal is giving AMC more flexibility to issue additional common equity in the future.
The results of the special shareholders meeting paves the way for the exhibition giant to continue raising fresh cash to reduce its debt load by selling stock, instead of APE units, and increasing its authorized share base.
“I would like to commend our shareholders for the wisdom exhibited in your votes by approving these proposals, and doing so by a wide margin. This is a landslide victory that shows your determination to keep AMC a strong and innovative company and the leader of our industry,” CEO Adam Aron said following the affirmative votes.
The conversion of APE units as approved could be delayed with a possible Delaware Chancery Court injunction hearing planned for April 27. The Delaware Court allowed the March 14 vote on the APE preferred units conversion to go ahead, but the planned court hearing in April could delay any new debt-raising action by AMC following the shareholder vote.
“We will keep you updated as we have more information,” Aron added about the upcoming court injunction hearing. The APE conversion vote will have the effect of eliminating a gap between the value of AMC common shares and its APE preferred dividend, which has hampered efforts to sell stock.
In late Dec. 2022, AMC announced it raised $110 million to pay down debt by selling APE units to Antara Capital, LP to reduce the company’s debt load by around $100 million. The vote at the special meeting of shareholders was required to permit a wider conversion of APE units into AMC common shares.
Converting APEs into AMC common shares had opponents as it will dilute the company’s stock, which effectively will reduce the overall share price. In early 2021, AMC became a popular stock among retail investors after the company appeared close to bankruptcy amid the pandemic fallout at movie theater chains.
The stock surge at the time helped the company strengthen its financial position, as executives seized the opportunity to sell shares and repurchase debt. But with stock in AMC having come back down to earth in value, the exhibition giant has been hard-pressed to keep raising fresh cash to run its business.
In August 2022, the company issued a special dividend to investors of one AMC preferred Equity unit, or APE, for each of AMC Class A common stock. Now the exhibitor wants to converge the APE units and common shares to stop investors buying the lower-cost APE shares and shorting the higher-cost AMC common shares as part of an arbitrage trade.
APE units rose 9 percent to $1.88 in trading on Tuesday, while AMC stock fell by 72 cents, or around 13 percent, to $4.74, as investors begin to anticipate a possible convergence.
