Published - August 25th, 2023 @ 9:47 PM (GMT+2)
Disney (NYSE:DIS) is on a downward trajectory, with its stocks set to close at their lowest since 2014, excluding the pandemic lows. The company's market capitalization has plummeted by $16 billion since Bob Iger resumed his role as CEO. This decline is significant, especially considering that Disney's market cap has dropped by $15 billion since Iger's return in November 2020. Market analysts attribute this decline to various factors, including technical reasons and the overall market sentiment.
AMC's Strategic Moves:
On the other hand, AMC Entertainment Holdings (NYSE:AMC) is undergoing a significant transformation. The company is set to convert its preferred equity units, APEs, to common stock. Traders have highly anticipated this move throughout the week. AMC introduced its APEs on the New York Stock Exchange last year to raise funds to offset company debts.
This decision was made after the cinema chain needed to secure more votes in 2021 to sell additional stock for capital generation.
In a recent development, AMC executed a 10-for-1 reverse stock split, effectively reducing the number of AMC shares in circulation. This strategic move will enable the company to issue more shares in the future.
As a result of this split, every APE unit held by a trader will be converted to 1/10 of an AMC share.
Settlement & Share Issuance:
The company also plans to issue common stock as a settlement payment for a litigation case between AMC and some of its shareholders. This settlement pertains to legal claims associated with the APE conversion plan. The initial plan to convert APE units to common stock was delayed, awaiting approval from the Delaware Chancery Court.
Litigation Settlement & Future Plans:
Financial analysts, including Wedbush's Alicia Reese, believe that once AMC completes the conversion and settlement payment, the company will have the authority to issue up to 550 million additional shares without further shareholder approval. AMC may utilize this opportunity to repay some or all of its debt, especially while its shares are trading at a premium.
However, on Thursday, AMC's stock closed 26.4% lower at $14.43. The primary concern among investors is the potential dilution of their holdings as AMC plans to issue more stock. Despite these concerns, AMC's CEO, Adam Aron, remains optimistic. He recently stated that those who believe dilution is a mistake are "wrong." Aron emphasized the importance of raising capital, highlighting that AMC managed to raise $418 million through the sale of APE units in the past year. As of the end of the second quarter, AMC had $435 million in cash reserves.
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