Key Points

  • AMC Entertainment Holdings Inc. faces a problem of having no more authorized common shares to sell for corporate finance purposes.
  • Attempts to amend the corporate charter to authorize more shares failed due to majority shareholder approval not being obtained.
  • The largely retail investor base of AMC, which constitutes the majority of shareholders, did not vote due to various reasons, causing the charter amendment to fail.
  • To overcome the challenge, AMC created a new class of stock called Preferred Equity Units (APEs), which are not subject to the charter's common share cap.
  • APEs have the same economic and voting rights as common shares and will automatically convert into common shares once shareholder approval is obtained to issue enough stock to cover all APEs

AMC Entertainment Holdings Inc. has recently come up with a clever way to overcome a common problem faced by many companies.

The problem is that the company has reached its authorized limit of common shares and cannot issue more without approval from the majority of its shareholders.

However, retail investors, who make up the majority of AMC's investor base, don't usually vote and the company failed to get the approval it needed.

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The Born of APE

To overcome this issue, AMC came up with the AMC Preferred Equity Units (APE) stock issuance plan. APEs are a new class of AMC share, technically known as AMC Preferred Equity Units, that are preferred stock and not subject to the cap of authorized common shares. The charter of AMC, like many other US public companies, contains a "blank check" preferred stock provision, allowing the board to issue preferred stock with whatever terms it likes, without shareholder approval.

So, AMC's board used this provision to issue APEs with terms identical to the common stock. APEs have the same economic rights and voting rights as the common stock, and on any matter that requires a shareholder vote, the common shares and APE units vote together. The APEs will automatically convert into common stock if and when AMC gets shareholder approval to issue enough stock to cover all the APEs.

AMC's charter allowed it to issue up to 50 million preferred shares, but the company wanted to issue more APEs. It made each preferred share equivalent to 100 common shares and each APE equal to 1/100th of a preferred share. However, since nobody really wants to issue fractional shares, AMC is not actually issuing fractional preferred shares.

Instead, when AMC issues APEs, it issues whole shares of preferred stock to a depositary, which issues APE units. The depositary receipt from Computershare Trust Co., a bank or trust company, is what investors receive when they buy an APE.

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AMC Indicators

One of the indicators that investors use to determine whether they will profit from a stock is its stock performance. AMC's stock performance has been up-trending over the past week, with a rise of 31.43%.

However, the stock has dropped -11.54% over the past month, -16.23% over the past three months, and -46.41% over the past six months. The stock lost -63.75% in the past year, while it has gained 24.32% so far this year.

A look at the trailing 12-month EPS for AMC yields -1.37 with Next year EPS estimates of -0.41. For the next quarter, that number is -0.16. This implies an EPS growth rate of 93.20% for this year and 64.20% for next year.

Institutional Ownership

AMC Entertainment Holdings Inc. AMC institutional ownership stands at 28.49%, with The Vanguard Group, Inc. being the largest shareholder at 9.33%. Other institutions hold 3.83% of AMC, while mutual funds hold 14.80% and individual shareholders hold 11.71%. It's worth noting that the largest institutional shareholders, The Vanguard Group and BlackRock Fund Advisors, both hold significant stakes in AMC.

The Insider Activity

Seven analysts currently follow AMC, with 0 recommending a BUY, 4 suggesting a SELL, and 3 believing the stock is worth HOLDING. The average target price for AMC over the next 12 months is $2.39, which represents a decline of -52.77% from current levels.

Insider trading activity for AMC stock has been mixed over the past three months, with no buys and no sells reported. However, over the past year, the number of buy transactions has increased while the number of sell transactions has risen, indicating that insiders are not necessarily bullish on the stock. Additionally, the total number of shares bought during that period was less than the number of shares sold, further suggesting that insiders may not be confident in the stock's future performance.

Hedge Funds and other Institutional Investors

Next, let's examine the activity of hedge funds and other institutional investors. According to a recent filing, these investors have been adding to or reducing their stakes in AMC stock.

Bank of New York Mellon Corp, for example, lifted its stake in shares of AMC by 0.6% during the 3rd quarter, while Toroso Investments LLC boosted its holdings in shares of AMC by 52.4% during the same period. On the other hand, Balyasny Asset Management LLC and Neuberger Berman Group LLC increased their stake in shares of AMC by 442% and 12.9%, respectively. State Street Corp also increased its holdings in AMC by 0.4%.

AMC has come up with a clever solution to overcome the problem of reaching its authorized limit of common shares. By issuing APEs, the company has been able to issue more stock without the approval of its shareholders, and it has done so in a way that does not compromise the rights and interests of its investors.

AMC's APE stock issuance plan is an innovative solution that shows the company's determination to succeed and its ability to adapt to new challenges.



About AMC ENTERTAINMENT HOLDINGS, INC.


  • Ticker AMC
  • Exchange NYSE
  • Sector Communication Services
  • Industry Entertainment
  • Shares Outstandng 513,329,984
  • Market Cap $1.27B
  • Description
  • AMC Entertainment Holdings, Inc., through its subsidiaries, engages in the theatrical exhibition business. The company owns, operates, or has interests in theatres in the United States and Europe. As of March 1, 2022, it operated approximately 950 theatres and 10,600 screens. The company was founded in 1920 and is headquartered in Leawood, Kansas.
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