AMC’s meme-stock sales are approaching its total valuation

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AMC Entertainment Holdings Inc. is selling another $110 million in stock, adding to a total that has already exceeded $2 billion since the theater chain got swept up into meme-stock madness and approaching the stock’s total market capitalization.

Shares of AMC

fell as much as 22% on Thursday, hitting their lowest intraday prices since March 2021, after the company announced plans for its latest equity capital raise. Executives also said they hoped to hold a shareholder vote on a 1-for-10 reverse split on AMC’s common stock, as well as a proposal to boost the allowed number of AMC common shares to permit the conversion of AMC’s preferred equity units — or APEs
a reference to the nickname for the retail traders in the meme-stock universe — into common stock.

The price of AMC’s APE units jumped 75.2% to $1.20 on Thursday. AMC shares closed with a 7.4% decline at $4.91.

Even before the $110 million equity raise announced Thursday, AMC had sold $2.04 billion in stock since the beginning of 2021 and the dawn of the meme-stocks era that that launched the movie-theater chain, GameStop Corp.

and others into the stratosphere.

See also: What can we expect from meme stocks AMC, GameStop and Bed Bath & Beyond in 2023?

That total does not include $159.1 million in stock sales that took place in the fourth quarter of 2020, before shares began to spike in January 2021. Including those sales with the others completed since the beginning of 2021 — $1.611 billion in common-stock offerings and $425 million in convertible shares — and adding the figure from Thursday’s announcement, would push the total even closer to AMC’s total market capitalization. The company’s market cap stood at $2.56 billion at Thursday’s close, according to Dow Jones Market Data.

AMC is raising the $110 million via the sale of millions of APE units to Antara Capital, which is also an AMC debt holder. Antara will also exchange $100 million in debt due in 2026 for around 90 million APE units. That swap, AMC said, would reduce AMC’s outstanding debt by $100 million.

Chief Executive Adam Aron said on Twitter that the move put the theater chain “in a much stronger cash position.”

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

Now, investors will be asked to vote to allow AMC’s board to increase the share count so that APEs can be converted into normal shares. They’ll also vote on whether to allow AMC to roll out a 1-to-10 reverse stock split, and whether to give the company the right to sell more shares instead of just APEs.

“Also, APEs worked exactly as intended to let us raise needed cash, buy back debt, explore M&A,” Aron continued on Twitter. “But a huge discount in APE market price vs. common stock must be addressed. We’ll hold a shareholder vote. It’s time to convert APE preferred into AMC common to eliminate that discount.”

See also: AMC thought about buying some Cineworld theaters, but it went nowhere

He added that a “company as distinguished as AMC shouldn’t let Wall Streeters wishing us harm drive us to being a ‘penny stock.’ So in the shareholder vote, you also can consider a 1:10 reverse stock split. Simple arithmetic, if approved, the share count goes down so share price goes up.”

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

Analysts tracked by FactSet on average expect AMC revenue to hit its highest level since the beginning of the pandemic in the fourth quarter — $1.21 billion. But they’re still projecting a loss of roughly $124 million in the period.

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