Investors Endorse Reverse Stock Split And Conversion Of APE Shares, Sending AMC Plunging

Investors in AMC approved a reverse stock split and the conversion of APE shares into common stock on Tuesday.

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This special shareholders meeting is expected to pave the way for the movie theater chain to continue raising cash, reduce its debt load through stock sales, and grow its share base. It was less than a year ago that APE stock was issued.

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There was a 17% decline in the company's shares on Tuesday.

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Based on the preliminary results of Tuesday's meeting, the APE conversion proposal passed by a margin of 978 million votes, or 88% of those who voted. It was also a unanimous decision that the second proposal, a reverse split of the company's common shares at a ratio of 10:1, would be adopted as well.

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Upon the announcement of the results of the vote, CEO Adam Aron said, "I would like to thank our shareholders for displaying wisdom by voting in favor of these proposals, which have been approved by an overwhelming margin," following the vote. “There is no doubt that this is a landslide victory that shows your determination to keep AMC a strong and innovative company and a leader in the telecommunications sector.”

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Additionally, he noted that the APE conversion vote will eliminate the gap between the value of AMC shares and its preferred dividend, which has hampered stock sales.

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The world's largest theatrical exhibitor could delay any new debt-raising actions by a Delaware Chancery Court injunction hearing on April 27.

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This hearing is centered on a class-action lawsuit that accuses AMC of circumventing shareholders who were against adding more shares to their portfolio by creating a preferred stock called the APE that circumvented their concerns. APE is the ticker symbol for AMC retail investors, who are known as "Apes" within the company.

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The CEO also addressed the April hearings, telling investors that he would keep them updated on the progress of the project.

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The vote on Tuesday comes less than a month after AMC reported disappointing earnings for its fourth quarter. As compared with the prior-year period, the company's revenue decreased 15% to $990.4 million, down from $1.17 billion in the prior year.

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There was also a wider loss for AMC, as the company lost $287.7 million, a steeper decline than last year's $134.4 million loss.

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Essentially, AMC continues to spend more money on operating costs and rent than it makes from admissions and concessions, which means it continues to lose money. It is estimated that the company had nearly $850 million in liquid assets available at the end of December.