AMC had hoped that today would be one of the best in it history: Its new APE shares are debuting on the stock market, with hopes that their sale will line the movie theater chain’s pockets with much-needed capital. But in pre-market trading, regular AMC shares have fallen off a cliff—and its new APE states aren’t totally to blame.
- What’s happening? AMC’s new “AMC Preferred Equity” (APE) class of shares go on sale today. However, in pre-market trading this morning, AMC shares are down a staggering 33% as of the time of this writing. Shares closed at $18.02 on Friday but are currently sitting at $12.18.
- What’s with the new APE shares? You can read Fast Company’s explainer on AMC’s APE shares here, but in short, they are a new class of stock created by AMC. Shareholders would not allow AMC to create more AMC shares, but thanks to an almost decade-old proposal passed by shareholders in 2013, AMC can issue an entirely new class of stock.
- Why is AMC issuing APE shares? AMC needs to raise cash and capital in order to ensure its future. As AMC Entertainment CEO Adam Aron told Yahoo Finance: “It takes survival risk off the table in the near term. So we can raise cash if we need it. That is good for our shareholders . . . The other thing it lets us do is raise capital to grow, raise capital for M&A activity, and raise capital to pay down debt.”
- If APE is good for AMC, why is AMC stock down 33%? This is where the picture becomes muddy. It’s likely the debut of APE today isn’t the main thing dragging down AMC stock. Instead, AMC stock collapsed this morning for two other reasons: 1) There’s a broad selloff in the markets this morning due to jitters about the economy, and 2) AMC competitor Cineworld has confirmed it may file for voluntary bankruptcy, reports CNN. Cineworld, the world’s second-most popular theater chain, said a lack of blockbusters this summer contributed to keeping moviegoers from returning to cinemas insignificant numbers. That, combined with low attendance during the first two years of the pandemic, has led to the chain taking on more debt.
- But why is Cineworld’s announcement driving down AMC stock? Cineworld is the No. 2 theater chain in the world—but AMC is No. 1. Investors worry that attendance problems for Cineworld mean attendance problems for AMC, too.
- So it’s a bad day for APE to debut, then? Yeah. It’s not the best day for AMC’s new stock to hit the market.
- What market will APE trade on? APE shares debut on the NYSE today, August 22.