Photo source: Bloomberg
AMC Stock announced $110 MILLION CAPITAL RAISE which has the apes in a bit of a frenzy. AMC is also recommending a 1-to-10 reverse stock split for its ordinary shares. In order to ratify the reverse stock split and convert APE units into AMC common shares, the firm is calling for a special shareholder meeting.
AMC Stock CEO Adam Aron said in a tweet down below: “Also, a company as distinguished as AMC shouldn’t let Wall Streeters wishing us harm drive us to being a “penny stock.” So in the shareholder vote, you also can consider a 1:10 reverse stock split. Simple arithmetic, if approved, the share count goes down so share price goes up.”
REVERSE STOCK SPLITS
By combining its outstanding shares into a smaller number of shares with a greater face value, a corporation can lower the number of its outstanding shares through a reverse stock split. By way of illustration, for example if a business performs a 1-for-2 reverse stock split, it will convert two of its current shares into one new share, thus reducing the total number of outstanding shares. The new shares would be worth twice as much as the original shares.
Companies that have seen a large decline in the price of their stock and are in risk of having their shares delisted from a stock exchange frequently use reverse stock splits. The firm can fulfill the minimal requirements of the exchange for listing and continue to be listed on the market by lowering the number of outstanding shares and raising the share price.
Reverse stock splits can also be done for other reasons, such as to increase the liquidity of a company’s shares or to make them more attractive to institutional investors. However, reverse stock splits are generally not viewed positively by investors, as they can be seen as a sign of financial distress or as a way for company management to artificially inflate the share price.
WILL THIS HELP AMC STOCK
The initial responses to this massive day of news from AMC Entertainment has the stock dropping in price significantly, but this news also comes on the same day that the entire market is down around 4%. It is too early to say how this will positively or negatively affect AMC Entertainment, AMC and APE stock in the future but there surely will more volatility ahead for some time.