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The price of AMC Entertainment stock is dropping nearly 4% during today’s early trading action after the company published its financial results covering the second quarter of the 2022 fiscal year.

Alongside the release of its quarterly earnings report, AMC Entertainment announced the issuance of a special dividend. According to the company, all shareholders of record by August 22 will be entitled to receive one AMC Preferred Equity Unit for every common share of AMC they own.

Each AMC Preferred Equity Unit will have the same economic and voting rights as a common share. AMC’s management appears to be using this mechanism to circumvent shareholders’ disapproval of previous proposals to issue and sell more common shares for the company to raise capital.

According to the official press release, AMC Entertainment there are currently 516,820,595 outstanding common shares, meaning that the same number of Preferred Equity Units will be issued as a result of this stock dividend.

Also Read: AMC Entertainment Buys Back $72.5M of Its Debt at 31% Discount

“This new AMC Preferred Equity gives AMC a currency that can be used in the future to strengthen our balance sheet, including by paying down debt or raising fresh equity”, stated the Chief Executive Officer of AMC Entertainment, Adam Aron, in regards to the dividend.

He added: “As a result, this dramatically lessens any near-term survival risk for AMC, as we continue to work our way through this pandemic. It also can provide AMC with added capital enabling us to seek investment opportunities that could create significant shareholder value and could be transformative in nature”.

Is This Dividend Dilutive for AMC Entertainment Stock?

amc entertainment stock price chart
AMC Entertainment (AMC) price chart – Source: TradingView

The instrument has been listed on the New York Stock Exchange under the ticker symbol APE to show appreciation to the retail investors who stepped up to buy the firm’s shares in 2021 at a point when the company was struggling to survive the pandemic. These investors were typically dubbed the “apes”.

These preferred stock units were approved by shareholders back in 2013, many years before the apes came on board. The CEO of the company clarified that, upon gaining shareholders’ approval, it will be possible to convert one AMC Preferred Equity Unit into a common share of the company.

Alongside the issuance of the stock dividend, shareholders of record will also be entitled to receive an exclusive “I OWN APE” non-fungible token (NFT) to celebrate the event.

AMC Entertainment Reports Narrower Net Loss but Cash Burn Continues

During the three months ended on 30 June, AMC Entertainment (AMC) generated sales of $1.17 billion compared to $444.7 million the company brought in during the same period a year ago as the business’s operations continue to recover from the hit they took during the pandemic.

The release of various box-office successes including Top Gun and Doctor Strange were responsible for the company’s positive top-line performance during this period. In this regard, CEO Aron stated that the management “would like to extend a special thank you to Doctor Stephen Strange, Tom “Maverick” Cruise, Elvis Presley, and all those hungry people-eating Jurassic dinosaurs who graced our big screens in the quarter”.

However, the company’s financial headaches were not alleviated by these higher revenues as AMC reported GAAP operating and net losses of $16.1 and $121.6 million during the period. Even though losses have been trimmed compared to a year ago, the company still burned $117 million in cash during the period.

By the end of this quarter, AMC Entertainment reported total cash and equivalents of $965.2 million and corporate borrowings of $5.4 billion. In addition, the firm said its available liquidity was $1.18 billion including undrawn revolving lines of credit.

Moving forward, the price of AMC Entertainment stock may be subject to further volatility once investors fully digest the impact of this stock dividend and the information contained in this latest earnings report.

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