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AMC Entertainment (NYSE:AMC) and AMC Preferred Equity units (NYSE:APE) are both slipping for a second straight day on the threshold of a transformative share conversion the theater chain launched in order to raise new equity.
AMC’s common shares (AMC) were down 18% Tuesday morning amid three separate trading halts for volatility. The stock had tumbled 24% Monday.
Meanwhile, the company’s preferred equity units (APE) were down 13% Tuesday morning, adding on to Monday’s 7% decline.
While both securities are declining, the price gap between them is narrowing ahead of AMC’s planned major moves this week: a 1-for-10 reverse stock split to come on Thursday, and the conversion of APEs into AMC common stock on Friday.
Those moves set the table for AMC to issue a few hundred million new shares to raise capital — a prospect for dilution that is applying heavy downward pressure to its stock price.
There’s still a legal matter or two outstanding. After all APEs are converted and delisted on Aug. 25, AMC next week plans a litigation settlement payment of one share of Class A common stock for every 7.5 shares of stock owned by settlement payment recipients.
The company, though, faces a new class-action suit from different investors over the conversion, which accuses AMC of shortchanging APE investors in the settlement that won approval from Delaware’s Court of Chancery.
