AMC is targeting the huge debt burden with the special “APE” dividend.

AMC Entertainment Holdings Inc. took Wall Street by surprise with the announcement of its special “APE” dividend after the market close on Thursday.

This, of course, is a company that is no stranger to bold moves, as evidenced by the movie chain’s $ 27.9 million investment in the Hycroft Mining Holding Corp. HYMC gold and silver mine.
-4.89%
earlier this year. The dividend also marks the latest move in a fight for stock issues.

The AMC Preferred Equity Units will be listed on the New York Stock Exchange under the symbol “APE”, a nod to investors who have turned the company into a meme stock, often referring to themselves as “monkeys” or “monkey nation” .

The special dividend is the latest leg of a journey that has led AMC Entertainment AMC,
+ 5.53%
from victim of a besieged pandemic to meme stock phenomenon. AMC’s meme stock status skyrocketed the company’s stock last year, before returning to earth.

AMC shares closed at a record $ 62.55 on June 2, 2021, after rallying more than six times in two weeks. With the stock down 7.2% in Friday morning trading, it was trading 72.3% below its record close.

While AMC remains a célèbre cause for a vocal community of individual investors, the company’s financial health is a cause for concern, according to data from RapidRatings, a company that evaluates the finances of public and private companies.

According to analysts, the APE special dividend could help AMC reduce its huge debt load.

See now: AMC Announces Special Dividend in Form of ‘Ape’ Preferred Stock; shares fall

The dividend “should be used opportunistically [reduce] total outstanding debt or otherwise, ”Benchmark analyst Mike Hickey wrote in a note released Friday.

AMC currently has about $ 5.5 billion in outstanding debt, according to Hickey. “We suspect management is targeting 3x – 4x AEBITDA leverage [adjusted earnings before interest, taxes, deprecation and amortization]. The FY24 consensus is $ 660 million in AEBITDA, which would translate into a total debt target of $ 2.3 billion, which would imply a total debt reduction target of $ 3.2 billion, “he added.

The benchmark has an AMC hold rating.

“We admit we are encouraged by the announcement of AMC’s preferred stock, as it will offer the company the opportunity to repay its huge debt and make investments to improve its global footprint,” Wedbush analyst Alicia Reese wrote in a statement. note published Friday.

The APE special dividend effectively creates a two-for-one stock split, with half listed under AMC and half under APE, according to Reese. “AMC is pre-authorized to issue up to 4.5 billion additional APE preferred stock to raise money,” she wrote. “If this transaction were to begin, we would expect AMC to issue a portion of its authorized APE shares in cash to repay most of its outstanding debt, thus making AMC a more attractive long-term investment.”

That would also free AMC to restore its quarterly dividend much sooner than it would otherwise, Reese added.

Wedbush has a lower rating and a $ 4 price target for AMC.

See now: How an investor applied the lessons of the meme stock frenzy to blockchain and NFT

AMC will issue an APE dividend for each of its nearly 517 million outstanding shares, according to CEO Adam Aron. “The issuance of tradable AMC Preferred Equity units only to our shareholders makes it clear who is included in our current shareholder base,” he said in the statement.

The company has been faced with unsubstantiated Internet conspiracy theories that there are millions of AMC synthetic shares outstanding, as well as requests for stock recount, according to a Wall Street Journal report.

The company, which issued an “I own AMC” NFT in January, will also issue an “I own APE” NFT to shareholders.

Speaking during a conference call to discuss the results, CEO Aron said AMC has the flexibility to issue more APEs in the future.

AMC also reported second quarter results after market close, reporting a shrinking loss that exceeded expectations and revenues in line with analysts’ forecasts.

“Attendance trends have benefited from an interesting roster of blockbuster films and consumer demand for out-of-home experiences,” wrote Benchmark analyst Mike Hickey. “We believe that the national box office can generate growth in a recession scenario.”

“AMC has maintained some market share gains over its pre-pandemic average as it improves its presence both nationally and internationally,” wrote Wedbush’s Alicia Reese. “In addition, AMC is managing well the macro headwinds that drive up concession costs, utility costs and wages.”

Speaking on the conference call to discuss the results, AMC CEO Aron said there is a “lack” of new big movie titles coming out in August and September, adding that “things will slow down for several weeks.” However, that will change during the fourth quarter, with a slew of major films. These include Jamie Lee Curtis in “Halloween Ends”, Julia Roberts and George Clooney in “Ticket to Paradise” and Tom Hanks in “A Man Called Otto”, as well as the sequels to “Black Panther”, “Shazam” and “Avatar.”

See now: AMC may have been a meme treasure trove, but weakness in some key areas has the company on shaky ground

“So the list of films for calendar year 2023 should also make us all smile,” he added. “We are looking forward to the fourth quarter of 2022 and we are looking forward to the calendar year 2023 with absolute joy.”

AMC’s stock was up 17.9% in the past three months, but still lost 36.3% year to date, while the S&P 500 SPX Index,
-0.31%
it has fallen by 0.1% in the past three months and this year it has lost 13.1%.

Of the seven analysts surveyed by FactSet, three have a hold rating and four have a sell rating on AMC.

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