Investors sour on AMC's proposed APE sale
AMC's stock price took a nosedive Monday after the company disclosed it reached a deal with Citigroup to sell 425,000 million new shares of its AMC Preferred Equity (APE).
Why it matters: AMC continues to lean into its "memestock," status but CEO Adam Aron's latest gambit is causing angst among investors.
- The company has more than $5 billion in debt.
Driving the news: AMC disclosed in an SEC filing that it will partner with Citigroup to sell the shares, though the company did not give a timeline of the sale.
- Shares of APE closed down nearly 6% at $3.37 yesterday. It has since rallied this morning and was trading above $3.59 per share as of 10:30am EDT.
- At its current value, AMC could net more than $1.4 billion for the sale. Even so, APE shares are worth about half of last month's debut.
- AMC's common stock also took a beating Monday, falling 14% to $6.83. It's now trading at $7.39 a share.
The big picture: When APEs first debuted, Aron told investors the true value of their AMC stock was a combination of the two securities.
- APEs initially were given a special dividend to shareholders that held the same value and voting power as common stock. The hope was that both shares would grow individually and that APEs could serve as a pathway to raise more funds.
- But since the Aug. 22 debut of APEs, AMC's collective shares are down 44%.
- Since APEs could eventually be converted over to common stock, investors are now wary of their value becoming further diluted.