(Bloomberg) — AMC Entertainment Holdings Inc., the world’s largest theater chain, rose to its highest point in four months after its army of small investors embraced a new class of preferred stock that the company distributes.
Most read by Bloomberg
The stock gained 19% to $22.18 on Friday near the New York close after initially falling following the announcement of the new units on Thursday. The preferred stock will begin trading Aug. 22 under the “APE” ticker on the New York Stock Exchange.
AMC has had dizzying years, starting with a pandemic-related drop in sales in 2020 that pushed the chain to the brink of bankruptcy. The company was rescued in part by small investors calling themselves monkeys, who are rallying on Reddit message boards, Twitter, and YouTube to pump up its stock. They have been busy touting the shares since Thursday evening.
“We’ve officially struck,” one participant posted on Reddit. “Words cannot express my happiness right now.” Another said: “I bought ten more shares today.”
The market initially reacted skeptically to AMC’s preferred stock plan. In 2021, the company tried to issue more common stock, but failed. Executives, led by Chief Executive Officer Adam Aron, regrouped over the past year and realized they could instead issue preferred stock to raise capital. Shareholders had authorized the company to do so in 2013, before Aron was CEO.
AMC will give each common shareholder a preferred unit of stock as a dividend. Later in August, those units will start trading and investors will be able to buy and sell them normally. The company may also issue new APE shares to raise money, Aron said in an interview following the company’s earnings call. That could help pay off some $10 billion in debt and lease obligations and buy other theater chains.
The new equity “greatly reduces any risk of survival as we continue to navigate our way through this pandemic,” Aron said in a letter to shareholders.
While many small investors liked the idea, the response from analysts was mixed. Some expressed concerns about possible dilution of the new shares, others said it could be an attractive way to reduce debt.
“It’s complicated,” Aron wrote in a self-proclaimed “tweetstorm” about the dividend on Twitter, “but it’s really satisfying to play 3D chess.”
Most read from Bloomberg Businessweek
©2022 Bloomberg LP