Shares of AMC Entertainment (NYSE:AMC) are taking a breather following the return of Roaring Kitty, who is best known for helping spur the meme stock craze of 2021. AMC stock is still up by over 100% during the past month.
This morning, the movie theater chain announced that it entered into an agreement to issue 23.28 million shares in exchange for $163.85 million worth of 10%/12% cash/payment-in-kind (PIK) toggle second lien subordinated notes due in 2026. In other words, AMC is issuing shares in exchange for debt.
This move has dilutive effects on shareholders but reduces the company’s debt load. AMC disclosed that it could enter into similar transactions in the future but is not obligated to do so.
“Based on the aggregate principal amount exchanged plus $6,872,597 aggregate accrued interest thereon through the relevant date of exchange, the Common Stock issued had an implied value of $7.33 per share,” said AMC.
AMC Stock: AMC to Issue 23 Million Shares to Pay Off Debt
The news comes just two days after AMC revealed that it had completed its $250 million at-the-market (ATM) offering, which was announced on March 28. This was achieved through the sale of 72.5 million shares at an average per share price of $3.45.
Last December, AMC completed a $350 million ATM offering announced on Nov. 9. This was completed through the sale of 48 million shares priced at $7.29 per share. The offering helped reduce debt by $62.28 million and brought total gross equity capital raised in 2023 to $865 million.
As of March 31, AMC’s corporate borrowings totaled $4.518 billion, while its finance lease liabilities totaled $48 million. Even after the debt for equity exchange announced today, AMC still has plenty of debt on its balance sheet. That hints at further dilution in the future. Its shares outstanding as of the end of the first quarter totaled 263.4 million compared to 137.4 million year-over-year. That comes after a 1-for-10 AMC reverse stock split and the conversion of APE into AMC.
To sum it up, the dilution of AMC stock is likely not over.
On the date of publication, Eddie Pan did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
