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AMC Falls on Plan for Equity-Unit Dividend With ‘APE’ Ticker

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(Bloomberg) -- AMC Entertainment Holdings Inc. declared a special preferred stock dividend as a “reward” to its investors. Shareholders didn’t take it that way.

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Adam Aron, chief executive officer of the world’s largest cinema chain, said the new financial instrument would be akin to a stock split. Still, AMC shares sank 11% in late trading on the news. AMC could issue more of the preferred shares, which when converted to AMC stock would then dilute existing holders.

For now, investors will get one share of the new preferred stock, which Aron said was aimed at “recognizing our passionate and supportive shareholders.” The preferred stock, to be listed on the New York Stock Exchange under the ticker “APE,” would be convertible to AMC shares if authorized by the company and investors. Investors pushed back on an effort to issue 25 million new shares last year.

Aron said the company could authorize additional preferred shares in the future to reduce debt, make international theater acquisitions or even pay off obligations owed to landlords.

“Now we have shares that we can use the way we might have used common shares if they were available to us,” he said in an interview. While the company had authorized the issuance of preferred stock back in 2013, it waited until now to use them because of the result of last year’s shareholder vote, he said.

Apes are what the wave of small investors who dove into AMC shares during the pandemic call themselves. The dividend will be paid at the close of business on Aug. 19. The company is also making available an “I OWN APE” non-fungible token, which will be distributed to the 765,000 members of its AMC Investor Connect program, a way of staying in touch with shareholders.

The company reported a loss of 20 cents a share, excluding some items, better than the 24-cent loss analysts expected. Revenue more than doubled to $1.17 billion, matching estimates.

AMC is still shaking off a complete collapse in its revenue in 2020. While ticket sales are improving, the chain fell short of the $1.5 billion in sales it reported in the second quarter of 2019, before the pandemic started. AMC sold 43.5 million tickets in the US in the second quarter, compared to 71.9 million tickets sold in the second quarter of 2019.

Still, ticket sales more than doubled compared to a year earlier, helping drive revenue closer to pre-pandemic levels. AMC is also relying on higher prices to generate more cash. Major pictures including “Doctor Strange in the Multiverse of Madness” and “Top Gun: Maverick” helped draw customers to theaters in the second quarter.

Aron said he expects a slow period in the current quarter, until new releases such as the “Black Panther” and “Avatar” sequels come later in the year. He said he looks forward to the fourth quarter and all of next year “with absolute glee,” however.

Aron has made unusual moves in the past, including buying a 22% stake in mining company Hycroft Mining Holding Corp. in March. AMC said it wrote down some of the value of that investment, but still believes in it long term.

Shareholders rejected, on an advisory basis, Aron’s proposed $19 million pay package at the company’s 2022 annual meeting.

AMC shares were down nearly 8% to $17.05 in extended trading after the results were announced. The stock fell 33% this year through Wednesday’s close in New York, compared to a 13% decline in the S&P 500 Index.

(Updates with CEO comment in fifth paragraph.)

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