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Matt Levine

AMC’s APEs Might Stick Around

Also index-fund voting, anti-ESG, and the return of MoviePass

We talked yesterday about AMC Entertainment Holdings Inc.’s issuance of a new weird preferred stock thing called “APE units.” At a high level, an APE unit is a slight variant on AMC’s regular common stock, and AMC’s issuance of one APE unit for each share of common stock is just a 2-for-1 stock split. That is, I think, more or less what AMC was going for: It wants to have more common stock (to sell for cash, to pay employees, to pay for acquisitions), but it has run out of authorized common stock and can’t get its shareholders to approve more, so it is issuing APEs as a close substitute for common. The APEs have the same rights as the common stock: They have the same voting rights, they are entitled to any dividends the common gets, they get paid the same as the common stock in a merger or liquidation, etc. They represent the same economic claim on AMC’s future cash flows as the common stock does, so in theory — the theory that says that a share of stock is worth the present value of its expected future cash flows — they should be worth as much as the common.

On the other hand the APEs aren’t actually AMC common stock, and, uh, not everyone is necessarily buying AMC stock based on a sober analysis of its cash flows. If you are investing in AMC for meme-driven reasons, you might prefer to buy the common stock because it is a more normal thing to buy and its ticker (AMC) is more obviously associated with the name of the company. Or you might prefer to buy the preferred stock because it is a less normal thing and that’s fun, or because its ticker (APE) is funny.  Or, because you are a meme-stock investor, you might prefer to buy call options on AMC, and the normal listed options reference the common stock, not the APEs, so the common should trade higher. In practice, so far, the demand for regular AMC common stock is stronger than the demand for APEs; yesterday the APEs closed at $7.02 per share and the common at $9.56, about a 27% discount for the APEs.