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Shares of AMC Entertainment Holdings (NYSE:AMC) (NYSE:APE) are plunging lower in pre-market, down nearly 24%, after the company announced a highly dilutive capital raise and proposed a reverse stock split of its common shares.
The struggling movie theater chain entered an equity deal with Antara Capital, one of AMC’s major current debt holders, to raise $110 million via sale of its APE units to Antara at $0.66/unit. As part of the deal, the lender will also exchange $100M of AMC notes on its balance sheet for 91M APE units.
AMC’s board also announced intent to hold a special meeting to vote on:
1. Permission to convert APE units into AMC common stock.
2. Permission to enact a 1:10 reverse stock split of AMC common shares.
As part of the deal, Antara has agreed to hold onto their APE units for up to 90 days, but will vote on them at the special meeting in favor of the proposals.
Commenting on the deal, AMC’s Chairman and CEO Adam Aron noted that “given the consistent trading discount that we are routinely seeing in the price of APE units compared to AMC common shares, we believe it is in the best interests of our shareholders for us to simplify our capital structure.”
Common shares of AMC are plunging over 20% following the announcement, as investors fear the massive dilution that the conversion of debt and APE units will bring.
By contrast, APE is spiking sharply higher, gaining as much as 120% at one point, as holders favor the upcoming ability to convert the units into common stock.
