Stocks of movie theater chain AMC Entertainment Holdings Inc. crashed more than 35% on Monday after a Delaware court approved the conversion of AMC preferred shares (APE) into common shares.
AMC previously saw its plan for conversion of APE halted by a Delaware judge Morgan T. Zurn back in July. However, the decision has now been reversed, and the company will be able to go through with its plan. APE stock will stop trading on August 25.
According to a recent filing with U.S. Securities and Exchange Commission (SEC), AMC also plans to issue a 1-to-10 reverse stock split. Shareholders will receive one share for every 10 shares they own, but the new shares will be more valuable. The reverse stock split will be executed on August 24.
The news about APE conversion approval didnāt sit well with investors, who started selling off their holdings due to fear that the move would cause a dilution of the stock. AMC shares closed at $5.26 per share on Friday before plunging as low as $3.30 at one point on Monday.
AMC believes that the APE conversion will represent a turning point for the company.
āAMC should now be able to raise additional equity capital,ā CEO Adam Aron wrote in a letter sent to investors over the weekend. āWe can use this access to equity capital to shore up our cash reserves, pay down debt, invest in growth initiatives to strengthen our operating profitability, and pursue transformative merger and acquisition opportunities.ā