AMC’s APE gambit appears to be paying off.
AMC Theatres says it has raised $162 million from its AMC Preferred Equity units (APE) since launching the stock just a few months ago. Ahead of the market open on Monday, AMC shares were trading at $5.31, while APE shares were trading at $0.73.
“Even though the APE units and our common shares are economically equivalent, it is disappointing that the APE units have since inception consistently traded at a significant discount to the AMC common shares,” AMC CEO Adam Aron said in a statement.
However, he added that “while the trading prices of the two securities seem to reflect distinct market and trading dynamics, the APEs are serving precisely the purpose originally intended for them.”
To that end, the company is using the cash raised to pay down its debt and to fund some strategic acquisitions.
The company says it has reduced its overall debt obligations by $180 million this year (reflecting both refinancing and the purchase of existing debt at a discount), and that it has acquired a former ArcLight location in Boston, Massachusetts.
The company says it will end 2022 with between $725 million and $825 million, though the exact number will depend on the performance of theaters through the end of the year (Avatar 2 being a critical piece of that), and including its revolving credit facility.
The global box office is widely expected to improve next year, though it is not expected to return to pre-pandemic levels, as the flow of movies to theaters continues to be slower than before and with the pandemic still wreaking havoc in various markets, not to mention more comfort with streaming by consumers.
AMC has responded with a regular cadence of gambits, some with logical ties to its existing business (a plan to sell popcorn in supermarkets and on delivery apps, an AMC-branded credit card, Zoom-powered meetings from its theaters), and others with less tangible connections (a stake in a gold mine in Nevada). It’s all in the name of keeping AMC a “memestock,” with the APE offering the culminating event.
“Our outlook for the industry is positive as we expect the box office will be larger in 2023 than in 2022,” Aron added. “Our liquidity position is strong, as we continue to demonstrate our ability to raise cash, thereby strengthening our balance sheet. We also continue to enhance our footprint by acquiring superb theaters without significant capital outlays, while at the same time exiting under-performing locations. For so many reasons, we believe the future remains bright for AMC.”