AMC’s stock sales are approaching its overall valuation

The price of AMC’s APE units jumped 75.2% to $1.20 on Thursday. Shares of AMC closed down 7.4% at $4.91.

Even before the $110 million capital raise announced Thursday, AMC has sold $2.04 billion in stock since the start of 2021 and the dawn of the stock meme era launched the movie theater chain, GameStop Corp. GME,
-3.65%
and others in the stratosphere.

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This total does not include $159.1 million in share sales that occurred in the fourth quarter of 2020, before shares began to rise in January 2021. Including those sales with others completed since the beginning of 2021 – $1.611 billion in common stock offerings and $425 million in convertible shares — and adding the number from Thursday’s announcement, would push the total closer to AMC’s total market capitalization. The company’s market capitalization was $2.56 billion at the close Thursday, according to market data from Dow Jones.

AMC raises $110 million by selling millions of APE units to Antara Capital, which is also AMC’s debt holder. Antara will also exchange $100 million of debt due in 2026 for approximately 90 million APE units. AMC said this swap would reduce AMC’s outstanding debt by $100 million.

CEO Adam Aron he said on Twitter that the move puts the theater chain “in a much stronger critical position”.

Aaron has tried to find ways to increase AMC’s stock count and sell more shares — a move the company has resorted to after pandemic-related shutdowns left the movie theater industry on life support. After investors resisted calls to increase the share count last year, Aaron introduced APEs as a way to continue selling shares without increasing the share count.

Now, investors will be required to vote to allow AMC’s board of directors to increase the number of shares so that APE can be converted into common shares. They will also vote on whether to allow AMC to offer a reverse stock split from 1 to 10, and whether to give the company the right to sell more shares rather than just APEs.

“Also, APEs worked exactly as intended to allow us to raise needed cash, buy back debt, and explore mergers and acquisitions,” Aaron continued on Twitter. But the huge discount in the market price of APE vis-a-vis common stock needs to be addressed. We will hold a shareholder vote. It’s time to turn favorite APE into popular AMC to get rid of that opponent.”

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He added that “a company as privileged as AMC shouldn’t let Wall Street’s ill-wishers push us into being ‘small stocks'”. So in a shareholder vote, you could also consider a 1:10 reverse stock split. Simple math, if approved. On them, the number of shares decreases and thus the share price increases.”

So far this year, AMC stock is down 82%. The company has not reported a quarterly profit since the start of the COVID-19 pandemic, and has recorded a cumulative net loss of more than $6.5 billion since the start of 2020.

Analysts tracked by FactSet on average expect AMC’s revenue to reach its highest level since the start of the pandemic in the fourth quarter — $1.21 billion. But they still expect to lose approximately $124 million in this period.