AMC preferred share units gather a throng as the company's stock rises over 13%

 AMC preferred share units gather a throng as the company's stock rises over 13%.


Following Friday's bizarre price movement, AMC Entertainment stock has risen 13.6 percent to start the week. One hour into Monday's New York trading day, shares are now trading at $25.20.

 The creation of a preferred share stock unit, which will be distributed to holders of record on August 15, seems to be delighting aficionados of meme stock. 

As the ex-dividend date approaches on Monday, analysts anticipate more share price growth. 


AMC preferred share units gather a throng as the company's stock rises over 13%


Shares have already reached a session high of $27.50. Calls for $20 that expire on Friday, August 12, are currently trading at $5.65, up 88 percent from Monday. 2,615 contracts changed hands on Monday.



AMC CEO Adam Aron's rallying cry to his AMC ape supporters with the unveiling of AMC preferred share units, which will trade under the symbol APE, was "Today we pounce.

" The $0.01 par value preferred share units will be distributed to all current ordinary stockholders as a kind of bonus. 


Confusion about the news ruled, and it wasn't quite the pounce the AMC apes had been hoping for. 

AMC stock saw a massive swing on Friday, going from being down 11% to closing up 19%. 

You might say that this was a regular day for an AMC stockholder back then! The news about the popular APE stock completely overshadowed the results that AMC talked about in other news.



News about AMC

The actual earnings per share (EPS) were $-0.20, which was marginally better than the predicted loss of $-0.23 per share. The revenue did fall short, but only by a minor amount: $1.16 billion as opposed to the average estimate of $1.18 billion. 

Strong attendance numbers showed that society was becoming more open and that the releases during the quarter were well received.


News about AMC Preferred Stock

On to the actual work at hand. The unveiling of AMC's preferred stock units completely eclipsed the results (APE). 

The anticipated so-called bonus preferred share was the cause of all the AMC army's excitement. But upon closer inspection, the apes are completely mistaken. 



In all probability, they are going to be hugely, massively diluted, and there is nothing they can do to prevent that. 

They recently lost their ability to vote, and therefore they can no longer object to the issuing of dilutive shares.


Instead of preferred stock, AMC shareholders will get preferred equity units. 

The ticker symbol for these AMC preferred equity units will be APE. 

You will get one preferred unit, which entitles you to one additional vote for each share of AMC that you own. 


Your ability to vote is preserved as a result. To all AMC stockholders, AMC is issuing just under 517 million preferred ownership units.


Taking from AMC's own SEC filing

The interest in one-hundredth (1/100th) of a share of the Company's Series A Convertible Participating Preferred Stock (the "Preferred Stock") is represented by each AMC Preferred Equity Unit. 

According to the conditions listed below, each share of preferred stock is initially convertible into one hundred (100) shares of the company's common stock.


Voting Rights

Each AMC Preferred Equity Unit represents an interest in one hundredth (1/100th) of a share of the Preferred Stock, and since holders of the Preferred Stock will initially be entitled to one hundred (100) votes per share and will vote alongside holders of common stock on an as-converted basis, each AMC Preferred Equity Unit corresponds to one vote in situations where holders of the Preferred Stock are allowed to vote.


In Addition, AMC Preferred Equity Units

The Company may sometimes issue additional AMC Preferred Equity Units that will be part of the same series of securities without the agreement of holders of AMC Preferred Equity Units.


The company's authorized preferred stock was designated as Series A Convertible Participating Preferred Stock by the company in a Certificate of Designations (the "Certificate of Designations") filed on August 4, 2022 with the Secretary of State of the State of Delaware.


When we issue preferred stock, like the Series A Preferred Stock, the price of our common stock may go down, dividends on our capital stock may be limited, and the voting power of our common stock may be diluted.



Are we clear yet?  You received a single voting right in a preferred unit from AMC, but the company also applied to issue 10 million preferred shares (different from preferred units). 

AMC preferred shares have 100 voting rights per share. 


Thus, 1 billion voting rights are equivalent to 10 million times 100. 

They may also be converted into 1 billion shares of ordinary stock. 

Each share of preferred stock is initially convertible into 100 shares of common stock of the company under the conditions outlined below. Check out what AMC CEO Adam Aron tweeted right now:



Let's be honest, I guess those preferred shares with 100 votes basically loaded the deck. 

If AMC proceeds with the issuance of the 10 million preferred designations and if they are converted, there might be a significant dilution of voting power and convertible dilution. 


The last time AMC tried to sell additional stock, the AMC Apes voted against it because they understood it would dilute the company's ownership. They no longer have the ability to veto it.


AMC stock forecast

It's probable that the uncertainty will persist for some time and may not even be noticed. I think this is a brilliant approach, but it won't benefit common stockholders. 


The delayed leases and mountains of debt that AMC has will need to be repaid in the next few years. To settle this, money is required. 

It needs to raise money, but AMC apes rejected that idea. As a result of their loss of influence, AMC should be able to issue more diluted shares and raise more funds.

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