After months of legal battles, AMC Entertainment Holdings Inc. is finally moving forward with its reverse 1-for-10 split of its common stock and AMC Preferred Equity unit stock conversion. This strategic move aims to help the company raise additional equity capital.
In light of these developments, Wedbush has raised its price target for AMC to $19 from $2. Wedbush analyst Alicia Reese notes that AMC’s court case resolution removes a significant overhang and predicts that the stock will settle around the new price target post-conversion and post-reverse-stock-split. Wedbush has also upgraded AMC to neutral from underperform, citing the company’s favorable position in an improving industry backdrop. Additionally, Wedbush expects the North American box office to show a 20% increase compared to 2022.
Four out of eight analysts surveyed by FactSet have a buy rating for AMC, while the remaining four have a sell rating.
Delaware Chancery Court recently approved AMC’s revised stock-conversion plan after a previous attempt was blocked by Judge Morgan Zurn. This plan is an essential part of AMC’s ongoing efforts to reduce its debt.
AMC CEO Adam Aron describes the court’s approval as a “significant milestone” and a relief for the company’s capital-raising efforts. Aron has consistently highlighted the liquidity challenges that AMC faces.
As AMC moves forward with its stock split and conversion, investors are eager to see how these strategic actions will impact the company’s overall financial outlook.
AMC’s Reverse Stock Split and Share Conversion
AMC Entertainment Holdings (AMC) is set to undergo a reverse stock split on Thursday, reducing its common share count to 52 million. Simultaneously, on Friday, the company’s 995 million APE shares will convert to approximately 100 million AMC shares. Notably, APE shares will cease to trade after Friday. Additionally, on August 28, AMC will distribute one additional share for every 7.5 shares held as of the closing on August 24. This move will result in a pre-conversion AMC share count of 59 million, representing a 13% increase.
Following these actions, the outstanding AMC shares will amount to 158 million. Reese from Wedbush explains that this will enable AMC to issue up to 550 million additional shares without requiring further approval from shareholders. This newfound flexibility may allow the company to repay some or all of its debt balance, particularly while AMC shares continue to trade at a premium.
On Wednesday, AMC shares experienced a decline of over 20%, ultimately closing down 1.5%. Retail trading activity was active as J.P. Morgan reports buy orders outnumbering sell orders by 2.5:1.
As of premarket trades on Thursday, AMC shares have depreciated by 11.5%, while the APEs have faced a 5.8% decline.
Amidst its tumultuous journey in recent years, AMC has transitioned from a pandemic-stricken enterprise to a prominent presence in the meme-stock market. Leveraging the surge in its share price, AMC successfully raised $917 million through equity and debt offerings in January 2021.