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Why AMC Theatres Went “APE” in Bid to Reclaim Memestock Status

·3 min read

AMC Entertainment CEO Adam Aron is known for his rhetorical flourishes, whether in interviews with CNBC, appearances at CinemaCon or on earnings calls. But for the company’s second-quarter 2022 investor call on Aug. 4, he went full Braveheart. “Today, we pounce,” Aron declared, a reference to retail investor questions about when the company would make its next move.

“It is now time for us to take decisive and even valorous action,” he added, encouraging listeners to look up the word in the dictionary. As he has before, he framed his latest move as part of a larger battle between the good guys of AMC and unnamed “prophets of doom who may be rooting against us.”

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And what was this “bold, decisive” move, one that could “transform” the company? It was something that in normal circumstances would make an accountant yawn: a special stock dividend, effectively serving as a stock split. But this special dividend would be AMC Preferred Equity, or APE, for short.

To the retail investors and “memestock” traders that helped AMC raise more than $1.3 billion in 2021 and wipe out hundreds of millions of dollars in debt, the move was about sending a message: Many loyal AMC retail investors refer to themselves as “apes,” and Aron as the “silverback.” But Aron’s move is twofold. On the one hand, he has made it a strategic priority for AMC to do something out of left field every few months, in an effort to keep that retail interest (consider AMC’s retail popcorn sales push, or its investment in gold and silver mine Hycroft).

But despite the pandering to traders on Reddit or TikTok, the APE dividend serves another purpose: It gives the company the option to raise more cash in the future. In 2021, the company asked investors to sign off on a plan to issue new shares that it could use to raise money. Shareholders indicated that they weren’t on board, and the company tabled the proposal.

The APE dividend revives that proposition, with no shareholder approval required. (In 2013, when the China-based Wanda was majority shareholder of AMC, the shareholders gave the company the ability to issue special preferred shares of stock.) With two forms of equity trading at the same time, the company opens up new shares to sell. “It essentially takes near-term survival risk off the table,” Aron said, noting that the company could, if it wanted to, sell millions of APE shares.

“It really is satisfying to play 3D chess, especially if you know how to play it well,” Aron added on Twitter.

The reaction from Wall Street was mostly positive, with Benchmark analyst Mike Hickey arguing Aug. 5 that the APE shares should be used to de-lever debt. “We admit that we are encouraged by AMC’s preferred equity announcement, as it will afford the company an opportunity to repay its massive debt and make investments to improve its global footprint,” added Wedbush analyst Alicia Reese in a research note.

Whether the gambit works remains to be seen. The split will cause AMC’s primary share (AMC) to fall in value (the company hopes the combo of the AMC share and the APE share is greater than the sum of its parts). And while AMC’s retail investors have been patient, releasing the APEs after shareholders pushed back on a plan to issue new stock could damage that relationship.

For now, the reaction among the “AMC Apes” community at press time appears largely positive on the official AMC Stock subreddit, which counts more than 470,000 members. But if they do lose the support of some shareholders, Aron and AMC have other levers to pull to keep those fans engaged. And so on the earnings call he also announced a “token of appreciation” to shareholders, to “celebrate” the APEs.

“For our shareholders’ continued support, we also will be offering a free ‘I Own APE’ NFT to all investors,” Aron said. The NFT features a gold coin, emblazoned with the words “I OWN APE,” behind a golden velvet rope.

This story appeared in the Aug. 10 issue of The Hollywood Reporter magazine. Click here to subscribe.

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