AMC Entertainment jumped 19% after 'Apes' touted new share class

(Bloomberg) — AMC Entertainment Holdings Inc., the world’s largest theater chain, rose to a four-month high after its army of small investors embraced a new class of preferred stock the company is distributing.

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Shares gained 19% to $22.18 at the close in New York on Friday, after initially falling after the new units were announced on Thursday. The preferred shares will trade under the ticker “APE” on the New York Stock Exchange from August 22.

AMC has had a dizzying few years, starting with a pandemic-related revenue collapse in 2020 that brought the chain to the brink of bankruptcy. The company was partially saved by small investors who call themselves monkeys and gather on Reddit, Twitter and YouTube message boards to pump up the stock. They are promoting the stock again from Thursday evening.

“We’ve officially hit it off,” one participant posted on Reddit. “Words cannot express my happiness right now.” Another said, “I bought ten more shares today.”

The market reacted initially with skepticism to AMC’s preferred stock plan. In 2021, the company tried and failed to issue more common stock. Executives, led by CEO Adam Aron, regrouped in the past year and realized they could instead issue preferred stock to raise capital. Shareholders gave the company permission to do so in 2013, before Aaron was CEO.

The AMC will give each ordinary shareholder preferred capital as a dividend. Later in August, these units will start trading and investors can buy and sell them as normal. The company may also issue new shares of APE to raise cash, Aron said in an interview after the company’s earnings call. That could help it pay off about $10 billion in debt and lease obligations and buy other theater chains.

The new capital “dramatically reduces any survival risk as we continue to navigate this pandemic,” Aron said in a letter to shareholders.

While many retail investors liked the idea, the reaction from analysts was mixed. Some expressed concern about potential dilution from the new shares, others said it could provide an attractive way to reduce debt.

“It’s complicated,” Aaron wrote in a self-described “tweet storm” about the dividend on Twitter, “but it’s really satisfying to play 3-D chess.”

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