AMC falls on plan for unit share dividend with ‘APE’ ticker

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(Bloomberg) — AMC Entertainment Holdings Inc. has declared a special preferred stock dividend as a “reward” to its investors. That’s not how shareholders see it.

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Adam Aron, chief executive officer of the world’s largest cinema chain, said the new financial instrument would be similar to a stock split. Still, AMC stock fell 11% in late trading on the news. AMC could issue more of the preferred shares, which, if converted into AMC shares, would dilute existing holders.

For now, investors will get one share of the new preferred stock, which Aron said was intended to “recognize our passionate and supportive shareholders.” The preferred stock, which is listed on the New York Stock Exchange under the ticker “APE,” could be converted into AMC stock if approved by the company and investors. Investors reversed an attempt to issue 25 million new shares last year.

Aron said the company could authorize additional preferred stock in the future to reduce debt, make international theater acquisitions, or even pay off obligations to landlords.

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“Now we have stock that we can use as we would have used common stock if they were available to us,” he said in an interview. Although the company approved the issuance of preferred stock in 2013, it has waited until now to use them because of the outcome of last year’s shareholder vote, he said.

Monkeys are what the wave of small investors who have dived into AMC stocks during the pandemic call themselves. The dividend will be paid at the close of trading on August 19. The company is also making available a non-fungible “I OWN APE” token, which will be distributed to the 765,000 members of its AMC Investor Connect program, a way to keep in touch with shareholders.

The company reported a loss of 20 cents per share, excluding some items, better than the 24-cent loss analysts had expected. Sales have more than doubled to $1.17 billion, which is in line with estimates.

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AMC is still rocking a complete slump in its revenues in 2020. As ticket sales improve, the chain lagged behind the $1.5 billion in revenue it reported in the second quarter of 2019, before the pandemic kicked in. AMC sold 43.5 million tickets in the US in the second quarter, compared to 71.9 million tickets in the second quarter of 2019.

Still, ticket sales more than doubled compared to a year earlier, bringing sales closer to pre-pandemic levels. AMC also relies on higher prices to generate more money. Big shots, including “Doctor Strange in the Multiverse of Madness” and “Top Gun: Maverick,” helped draw customers to theaters in the second quarter.

Aron said he expects a slow period in the current quarter, until new releases such as the “Black Panther” and “Avatar” sequels appear later in the year. However, he said he is looking forward to the fourth quarter and all of next year “with absolute joy”.

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Aron has taken unusual steps in the past, including buying a 22% stake in mining company Hycroft Mining Holding Corp. in March. AMC said it has written down some of the value of that investment, but still believes in it long-term.

Shareholders, on an advisory basis, rejected Aron’s proposed $19 million compensation package at the company’s 2022 annual meeting.

AMC shares fell nearly 8% to $17.05 in expanded trading after the results were announced. The stock fell 33% this year until Wednesday’s close in New York, compared to a 13% drop in the S&P 500 index.

(Updates with CEO comments in the fifth paragraph.)

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