Meme stock favorite AMC Entertainment (NYSE: AMC) has decided to pull the plug on a plan to issue more shares after investors remained split on the decision.
AMC Entertainment, the cinema chain that was severely hit by pandemic-related shutdowns last year, came roaring back as a popular meme stock, after retail investors plunged into the once collapsing stock to the ire of short-sellers. The company, which faced over $4.5 billion in debt and $450 million in deferred lease payments at the beginning of the pandemic, has since regained much of its momentum, and as a result has been given several opportunities to raise more equity and pull itself away from the brink of bankruptcy.
However, on Tuesday, it appears that AMC may have hit the threshold that its current shareholders are willing to permit, and was forced to abandon plans for the creation of 25 million new shares. The plan, which would have raised over $1 billion in new equity for the cinema company as per the closing price on Friday, was slated for a shareholder vote later in July. “It’s no secret I think shareholders should authorise 25 million more AMC shares,” explained AMC CEO Adam Aron via Twitter. “But what YOU think is important to us. Many yes, many no. AMC does not want to proceed with such a split.”
Since the beginning of the year, AMC stock has soared to new highs, as retail investor interest made the cinema company one of the most popular meme stocks aside from video game retailer GameStop. AMC took advantage of the rally, and successfully raised $1.25 billion via share sales throughout April and June. But, the sales have pushed the amount of stock the company is able to issue to its limit, which was pre-determined in its incorporation records.
Earlier this year, AMC made an effort to have the limit raised, but the notion was soon withdrawn after it became evident that it would not gain enough shareholder approval. On Tuesday, Aron said the company will likely not make a third attempt at having the limit raised until at least 2022. The company’s shareholder demographics are now comprised of over 3 million retail investors, which amount to 80% of its entire shareholder base, compared to just 10% at the beginning of 2021.
Information for this briefing was found via AMC Entertainment and Twitter. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.