AMC Entertainment Faces Share Drop and Stock Conversion Event

One sentence summary – AMC Entertainment, a well-known movie theater chain, saw a significant decrease in its share value due to an upcoming stock conversion event, with analysts offering varying projections for the company’s future stock price.

At a glance

  • AMC Entertainment experienced a substantial decrease in share value, dropping over 20% to hit a new low of $2.46 per share.
  • The share drop is linked to an upcoming stock conversion event where AMC’s preferred equity units will be transformed into common stock.
  • These preferred equity units helped AMC raise billions of dollars during the pandemic, enabling the company to pay off debts and avoid bankruptcy.
  • AMC is also planning a 10-to-1 reverse stock split of its common stock, effectively raising the authorized share count to 550 million.
  • Analyst predictions for AMC’s stock price range from $4.50 to 50 cents, with varying opinions on the company’s future.

The details




AMC Entertainment Share Drop and Stock Conversion Event

AMC Entertainment Share Drop and Stock Conversion Event

AMC Entertainment, a well-known movie theater chain, experienced a substantial decrease in its share value on Tuesday.

The company’s shares plummeted over 20% to hit a new low of $2.46 per share.

This drop is linked to the expectation of a stock conversion event set to occur later in the week.

Stock Conversion Event

During this event, AMC’s preferred equity units will be transformed into common stock.

These preferred equity units played a crucial role in enabling AMC to sell more stock after investors turned down the company’s efforts to issue more stock last year.

By utilizing these units, AMC was able to raise billions of dollars during the pandemic.

This funding helped AMC to pay off debts and avert bankruptcy.

Reverse Stock Split

Alongside the stock conversion, AMC is also planning a 10-to-1 reverse stock split of its common stock.

This action will effectively raise the authorized share count to 550 million.

This will allow AMC to issue over 390 million additional shares.

The recent turmoil in AMC’s shares comes after a lawsuit was filed in February.

The lawsuit alleged that the company manipulated a shareholder vote to convert preferred stock and issue new shares.

However, a revised stockholder settlement was approved by a Delaware judge last week.

This approval could potentially resolve these legal issues.

Since the announcement of the stock conversion, AMC’s stock has almost halved in value.

Analyst Predictions

Analyst Eric Wold sees this conversion as a strategic move for AMC to navigate the post-pandemic recovery and potential impacts from Hollywood strikes.

Wold forecasts that AMC will not achieve positive free cash flow until 2025.

This prediction underscores the need for additional liquidity.

Eric Wold has set a price target of $4.50 for AMC’s stock.

However, another analyst, Eric Handler, has a significantly lower target of 50 cents.

Handler cites an irrational valuation as the reason for his lower target.

He argues that AMC would need to generate nearly $1 billion in adjusted EBITDA to justify its current market capitalization.

AMC Entertainment’s recent share drop and the upcoming stock conversion event have raised concerns and uncertainties about the company’s future.

Analyst opinions vary, with projections for AMC’s stock price ranging from $4.50 to 50 cents.


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cnbc.com
– AMC Entertainment shares dropped over 20% on Tuesday, reaching a new 52-week low of $2.46 per share.
The decline is in anticipation of a stock conversion later in the week, where the company’s preferred equity units will be transformed into common stock.
These preferred equity units allowed AMC to sell additional stock after investors rejected the company’s efforts to issue more stock last year.
– AMC raised billions during the pandemic by selling new stock, helping to pay off debts and avoid bankruptcy.
– AMC is also planning a 10-to-1 reverse stock split of its common stock.
The authorized share count will increase to 550 million, allowing AMC to issue over 390 million shares.
The share upheaval follows a lawsuit in February alleging that the company rigged a shareholder vote to convert preferred stock and issue new shares.
– A revised stockholder settlement was approved by a Delaware judge last week.
The stock has nearly halved since the announcement of the stock conversion.
– Analyst Eric Wold sees the conversion as a way for AMC to weather the post-pandemic recovery and potential impacts from strikes in Hollywood.
– Wold projects that AMC will not achieve positive free cash flow until 2025, so additional liquidity is necessary.
– Wold has a price target of $4.50 for the stock, while Eric Handler has a target of 50 cents, citing an irrational valuation.
– Handler believes AMC would need to generate nearly $1 billion in adjusted EBITDA to justify its current market capitalization.

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