On Thursday August 24th, AMC Entertainment Holdings (AMC) committed the sin of reverse split. AMC’s 1-for-10 reverse stock split happened just ahead of the conversion of its “APE” preferred shares into common shares of AMC.
Typically, reverse splits are not perceived well by market participants. The split indicates that the company’s stock price has hit rock bottom and there isn’t much the company can do about it. The 1-for-10 split took AMC’s stock price from $1.24 to $12.43 but its market cap remained the same.
Why AMC Initiated A Reverse Split
AMC went through with the reverse split for 2 major reasons:
- To keep AMC shares above $1 to satisfy NYSE listing requirements.
- To allow for the conversion of “APE” preferred shares into AMC common shares and allow the company to issue more shares down the line.
What To Expect Moving Forward
Time will tell how the market digests AMC’s desperate attempt to remain listed and move successfully into the future. As of right, following the reverse split, 5 things might be true about AMC’s common shares:
- Improved liquidity
- Shorter queues
- Tighter spreads
- Less dark pool (off exchange) trading
- Less price volatility
