Why AMC Stock Dropped as Much as 14.6% This Week
Shares of AMC Entertainment (NYSE: AMC) sank as much as 14.6% this week, according to data from S&P Global Market Intelligence. The movie theater chain and meme stock faced selling pressure after the company announced it was going to sell up to 425 million units of its AMC Preferred Equity Units (NYSE: APE). As of this writing at 3:50 p.m. ET, shares of AMC Entertainment are down 11.6% this week.
In August, AMC Entertainment paid its shareholders a dividend in the form of preferred equity units with the ticker "APE" (the ticker name is a reference to its being a meme stock). This was done as a corporate loophole in the form of a stock split; it allows any holder of APE units to convert their shares into AMC common stock on a one-to-one basis.
So you can see why investors got concerned on Sep. 26 when AMC announced it was authorizing an additional selling of 425 million APE units. With just over 500 million common shares outstanding right now, these new APE units could be highly dilutive for shareholders if they are ever converted into common stock. This is not good for existing AMC shareholders. As shares outstanding rise, the % ownership from your existing shares goes down, all else being equal.
Source Fool.com
