AMC data indicates 'panic' ahead of APE stock conversion, says Stocktwits

By James Rogers

'AMC investors who are still around are waking up to the reality that there are new shinier toys in the market that people can play with'

As AMC Entertainment Holdings Inc. prepares for its stock conversion, Stocktwits says that it is seeing "panic" with regard to the movie-theater chain and meme-stock darling on its platform.

Stocktwits is a social platform for investors and traders. "Sentiment has never felt worse in regards to AMC," Tommy Tranfo, head of community at Stocktwits, told MarketWatch, via email. "The data is communicating 'panic' pretty clearly here," he added, noting Stocktwits is seeing "extreme fear" regarding sentiment, as well as extremely high message volume.

AMC's stock (AMC) fell 17.7% on Tuesday after ending Monday's session down 23.7%, snapping a four-day winning streak. Some 26.7% of AMC's float is shorted.

Related: AMC shares fall more than 22% ahead of stock conversion

AMC is now competing with stocks such as Tupperware Brands Corp. (TUP), WeWork Inc. (WE) and Nvidia Corp. (NVDA) for investor attention, according to Tranfo. "AMC investors who are still around are waking up to the reality that there are new shinier toys in the market that people can play with, whether that's new and hotter meme stocks like TUP or WE or more traditional events such as NVDA earnings, which are coming up tomorrow and creating a lot of buzz on the streams," he told MarketWatch.

The conversion of AMC Preferred Equity units will result in the trading of a single AMC common share class and is part of the company's ongoing battle to eliminate debt. AMC is also planning a reverse 1-for-10 split of its common stock and an increase in its authorized common shares.

Tom Bruni, senior writer at Stocktwits, said he thinks there was an expectation among investors that the gap between APE and AMC shares would close by APE units moving upwards. Instead, we're seeing AMC shares move down drastically, he told MarketWatch. "This is likely due to the overall impact of the dilution and reverse split," he added.

Related: What's next for AMC after court approval of revised stock-conversion plan?

In a Form 8-K filed with the SEC last week, AMC explained that the reverse stock split is expected to occur on Aug. 24, which is also the record date set for a litigation-settlement payment as of the close of business that day. Conversion of APEs into AMC common stock is expected to occur on Aug. 25, with the APEs ceasing trading that day and subsequently being delisted from the New York Stock Exchange.

Contingent upon the reverse stock split and conversion, AMC will make a settlement payment consisting of one share of Class A common stock for every 7.5 shares of Class A common stock owned by settlement-payment recipients as of Aug. 24, the company said in its filing. Following the reverse stock split, based on 51,919,239 shares of Class A common stock expected to be held by the settlement recipients, an aggregate of 6,922,566 shares of Class A common stock will be issued in the settlement, according to AMC.

The APE units fell 10.4% Tuesday. The APE name is a nod to the investors who turned the company into a meme stock, who often refer to themselves as "apes" or "ape nation."

Related: These institutional investors have increased their positions in AMC

By proceeding with its stock-conversion plan, AMC will be more resilient and will also eliminate the capital-raising inefficiencies of APE units trading at a significant discount to AMC shares, AMC CEO Adam Aron said in a letter last week.

The resolution of AMC's court case removes "a significant overhang" for the company, Wedbush analyst Alicia Reese wrote in a note released last week. "We expect AMC and APE shares to converge around $3 into the conversion (APEs into AMC)," she said.

-James Rogers

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08-23-23 0810ET

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