AMC Entertainment (NYSE: AMC) stock will jump 1,000% at the open today. AMC stock is not, however, doing another of those meme stock leaps that it has become famous for. Rather, this is a purely technical part of the plan to settle the formerly sinking ship. This, particular, part of it isn’t of any real great import and it’ll not change the overall valuation. It is however something that needs to be done as a cog in that overall run of events.
As we all know AMC stock has been exciting of late. The conversion of APE into AMC happens tomorrow, Friday, after the court ruled that it can go ahead. That dilution is what has been dragging the AMC (and APE, the preferreds) down these past few days. 40% down by our count and on something this size that’s a considerable chunk of value just gone up in smoke. But this change today, no, this is just a nominal value change, not a real one.
AMC Entertainment stock price from Google Finance
The specific problem that needs to be solved is that with the APE conversion, plus the then large stock issue that allows, then the AMC stock price will be in danger of falling below the $1 minimum bid price. That’s what enables the company to say on the NYSE. Given the capital needs they want to stay on the NYSE as well, they’d not be able to raise the necessary if they fell to OTC. So, something needs to be done.
That something is to simply declare that 10 old shares are now one new one. A one for 10 reverse stock split that is.This doesn’t not on its own, change the market capitalisation of the company as a whole. Nor the value of any particular holding. It does change the number of shares that make up each of those. Therefore, and mechanically, the price of the stock changes by 10x, or 1,000%.
Stock splits happen because of fashion, perhaps culture, in the NY markets. Penny stocks are the home of the charlatans, the manipulators, therefore you can’t be on the major markets as a penny stock. And that’s it really - this particular part of the AMC Entertainment story is just a technical change to deal with that little problem.
