AMC Entertainment Holdings (AMC) has experienced a tumultuous week recently. On Friday, a Delaware court ruled that the company can convert all outstanding APE units into AMC common stock on August 24 under a proposal voted by a majority of shareholders. However, retail AMC shareholders have shown a negative/speculative attitude towards the passage of this proposal. AMC shares have lost 32% of their value in premarket trading since Friday, while APE units gained 20%.
According to AMC CEO Adam Aron, the proposal approved on Friday seeks to simplify AMC's shareholding structure and consolidate it into a single share class. Aaron noted that stock splits create complexity in stock brokerage operations, leading to capital inefficiencies.
Although AMC's debt scale is as high as $4.8 billion, the company's debt ratio has dropped to -186%. This negative percentage has increased as the share price has fallen. However, we remain optimistic about the market and believe that after the equity consolidation, AMC stock will be more attractive to investors.