AMC shares plunge after company announces reverse stock split, capital raise
Additional $100M debt swap reduces annual interest expense by approximately $10M
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AMC Entertainment is tapping an existing investor for new capital and proposing a 1-to-10 reverse stock split, the company announced.
The world’s largest movie exhibition company will raise $110 million of new equity capital through the sale of APE preferred equity units to Antara Capital.
AMC issued APE units in August as a special dividend to existing shareholders. Each APE is designed to have the same economic and voting rights as one share of common stock. They can be converted into stock only if AMC and its investors vote to approve an increase in the number of authorized shares.
Debt for equity exchange
Antara will also exchange $100 million of bonds due 2026 for approximately 91.0 million APE units. The debt-for-equity swap will reduce AMC’s outstanding debt by $100 million and reduce annual interest expense will be reduced by approximately $10 million.
"They're going to have to continue to raise capital to service all this debt to survive and it doesn't look that promising," said Thomas Hayes, chair and managing member of Great Hill Capital.
At the end of September, AMC's liabilities were $11.79 billion, which included corporate borrowing of $5.2 billion. Cash and cash equivalents were at $684.6 million, a fall from $1.59 billion a year ago.
Moviegoer shops at concessions stands at an AMC theater on reopening day during the outbreak of the coronavirus disease (COVID-19), in Burbank, Calif., Mar. 15, 2021. (Reuters/Mario Anzuoni / Reuters Photos)
| Ticker | Security | Last | Change | Change % |
|---|---|---|---|---|
| AMC | AMC ENTERTAINMENT | 4.98 | +0.19 | +3.88% |
| APE | NO DATA AVAILABLE | - | - | - |
Special board meeting
AMC’s board plans to hold a special meeting of holders of both AMC common shares and APE units (voting together) to vote on the following proposals:
- To increase the authorized number of AMC common shares to permit the conversion of APE units into AMC common shares.
- To affect a reverse-split of AMC common shares at a 1:10 ratio.
- To adjust authorized ordinary share capital such that, after giving effect to the above proposals if adopted, AMC would have the same ability to issue additional common equity as it currently has to issue additional APE units.
AMC CEO Adam Aron said AMC had cleared about $180 million of debt in 2022.
Aron touted the reverse stock split in a tweet, stating AMC shouldn’t let Wall Streeters drive the price down to "penny stock" territory. "So in the shareholder vote, you also can consider a 1:10 reverse stock split. Simple arithmetic, if approved, the share count goes down so share price goes up," Aron tweeted.
Cineworld talks end
Pedestrians walk past the entrance of a Cineworld cinema in London, on August 22, 2022. (Susannah Ireland/AFP via Getty Images / Getty Images)
| Ticker | Security | Last | Change | Change % |
|---|---|---|---|---|
| CNNWQ | NO DATA AVAILABLE | - | - | - |
The announcement comes after AMC abandoned plans to acquire certain theater assets of Regal Cinemas parent Cineworld in the United States and Europe. The acquisitions were to have been financed partly through the issuance of its preferred stock and debt financing provided by the lenders.
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AMC and other movie theater companies are facing declining theater attendance. Attendance for the nine months ended Sept. 30 was 151 million, down more than 40% compared with almost 264 million for the same period in 2019.
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Reuters contributed to this report.