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Strategies & Market Trends : Lessons Learned

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From: Don Green4/5/2023 5:38:28 PM
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AMC’s APE-conversion settlement could lead to ‘potentially massive’ $16 billion equity raise, says analyst

The stock conversion is part of AMC’s ongoing battle to eliminate debt

AMC’s APE-conversion settlement paves the way for a huge equity raise that could bring in as much as $16 billion.(MarketWatch photo illustration/Everett Collection)

AMC’s APE-conversion settlement paves the way for a huge equity raise that could bring in as much as $16 billion, according to B. Riley Securities analyst Eric Wold.

Wold said that the settlement clears the decks for a “potentially massive” equity raise. “Should the conversion of APE units to AMC common shares be permitted to proceed — along with the increase in authorized common shares and 1-for-10 reverse stock split — we continue to see a positive path for the company to raise significant amounts of capital,” he wrote in a note released Tuesday.

Related: AMC stock plunges 22% after company agrees to settlement terms, opening up for APE conversion

“At the recent trading price of AMC shares (accounting for the after-market performance on Monday), this would indicate the potential for as much as $16 [billion] in equity to be raised by the company,” Wold added.

AMC’s stock plummeted 23.7% before market open Tuesday, while the APEs rose 16.9%. AMC shares ended Monday’s session up 2%, or 79.9% off its 52 week high, FactSet data show. The APEs ended Monday’s session up 0.7%.

The movie-theater company’s total aggregate principal debt was $4.9 billion at the end of 2022, down from $5.2 billion at the end of 2021.

Also see: AMC shareholders approve APE conversion in ‘landslide victory’ but stock tumbles

Last month, AMC shareholders voted in support of the company’s proposal to convert AMC Preferred Equity units into shares of common stock in what the company’s CEO Adam Aron described as a “landslide victory.”

“Although we had felt it would be difficult for the judge to rule against the validity of this vote given the overwhelming support of stockholders, this now seems to be a moot point with the binding settlement announcement,” Wold wrote. “While we maintain our Neutral rating and $4.50 [price target] until final approval is granted and the conversion occurs, we still expect the prices of APEs and AMC shares to converge.”

AMC describes itself as the largest movie-theater company in the world, with approximately 950 theaters and 10,500 screens across the globe.

Related: AMC ‘positioned really well’ for 2023, says Wedbush

Over the past two years, AMC has been on a roller-coaster ride that took it from beleaguered pandemic victim to meme-stock phenomenon. AMC’s stock has risen 25.6% in 2023, outpacing the S&P 500’s SPX, -0.25% 7.4% gain, while the APEs have risen 5%.

Of eight analysts surveyed by FactSet, three have a hold rating and five have a sell rating for AMC.

Additional reporting by Claudia Assis.

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