The Ratings Game: AMC missed ‘golden opportunity’ to pay down $5.4 billion debt with APEs, says analyst

by | Nov 8, 2022 | Stock Market

AMC Entertainment Holdings Inc. reports third-quarter results on Tuesday, with the meme stock darling expected to provide an update on its APE equity units. The AMC Preferred Equity Units
APE,
-3.82%,
or APEs, made their trading debut in August, sparking volatility and heralding the latest chapter in an eventful journey that took the cinema chain from a beleaguered pandemic victim to meme-stock phenomenon.

The APEs, which hit an intraday low of $1.41 on Monday, have fallen 74.8% since their debut. The dividend hit an intraday high of $10.50 on Aug. 22. With its APE equity unit, AMC
AMC,
-5.66%
created something like a 2-for-1 stock split, marking the company’s latest effort in a fight over stock issuances. AMC is also taking aim at its massive debt burden with the APE special dividend. The name is a nod to the investors who turned the company into a meme stock, who often refer to themselves as “apes” or “ape nation.” AMC issued an APE for each of its roughly 517 million shares outstanding. AMC’s third-quarter results on deck: Will the meme-stock darling shake off concerns of a box-office slowdown? The dividend gave AMC a great chance to get rid of its debt burden, according to Wedbush analyst Alicia Reese. “We think AMC lost a golden opportunity to pay down or even pay off its $5.4 billion debt balance when it first issued its APE shares, and now has a more difficult decision to make in terms of how to best utilize the shares,” she wrote, in a note released on Thursday. “In the meantime, AMC has continued to restructure its debt, acquire and upgrade quality screens while removing underperforming screens.” In September, AMC unveiled plans to sell up to 425 million additional APEs, sending the equity units toward a new low. Concerns of a box-office slowdown in August and September have swirled around AMC. In August, when AMC reported its second-quarter results, CEO Adam Aron spoke of the “dearth” of big titles being released in that month and September, adding that “things will slow for several weeks.”  See Now: How one investor applied the lessons of the meme stocks frenzy to blockchain and NFTs Nonetheless, Wedbush analyst Reese sees positives looming on the horizon. “Theatrical exhibition is on the path to normalization, with a strong upcoming releas …

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