AMC shares drop 40% as Regal Cinemas owner warns of possible bankruptcy, APE units start trading

Shares of theater chains and favorite meme traders AMC fell sharply on Monday as a rival warned of possible bankruptcy and a new class of preferred stock hit the market.

Shares of AMC are down nearly 42%, based on a drop of more than 26% in the previous week. New preferred stock from AMC could be the main cause of the drop.

The theater chain’s “APE unit”, a tool for the company to have the ability to raise more cash in the future, which began trading on Monday after it was distributed to investors. In some ways, the new class of shares is similar to a stock split. The combined value of one AMC stock and one APE unit at Monday’s close was about 8.7% less than AMC’s Friday’s closing price. When adjusted for APE’s price in initial trading, shares of AMC fell 5.5% on Monday.

“It’s really a two-for-one split, and I hope that once it goes into effect, the price per share will drop by about 50 percent. It’s like a two-for-one split,” Jay said. Ritter, Cordell professor of finance at the University of Florida.

AMC CEO Adam Aron warned of the potential move over the weekend.

“Remember, when APE first trades on the NYSE tomorrow morning, the value of your AMC investment will be a combination of AMC stock and your new unit of APE. One AMC share plus a new APE unit added together – compared to just a previous AMC share,” Aron wrote on Twitter on Sunday.

The drop also came as rival Cineworld said on Monday that it was considering filing for bankruptcy. After Cineworld issued a warning about its liquidity position last week, AMC CEO Adam Aron said in a statement that “we remain confident about the future of AMC” and that the company is “rather optimistic.” reviews” about upcoming films in Q4 and 2023.

Even 2022 has seen hit movies like “Top Gun: Maverick” and studio executives have signaled interest in returning to theaters Instead of just releasing it online, the US box office has remained below pre-pandemic levels.

AMC reported more than $5 billion in long-term debt at the end of the second quarter. That total comes to more than $10 billion when lease obligations and other long-term liabilities are included.

The recent drop in AMC stock coincided with a sharp reversal in Bed Bath & Beyond. Both names have become big stocks with large percentages of retail investors and social media following. Bed Bath & Beyond 40% off on Fridays after activist investor Ryan Cohen revealed that he had sold his entire stake in the company.

– CNBC’s Kristina Partsinevelos contributed to this report.

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