Wedbush reduces AMC price goal to $2 in the wake of the APE release of shares

Wedbush has lowered its price goal for AMC down to $1 from $2 and reiterated its downgrade rating for the stock following the launch of preferred shares owned by the company on Monday.

The new price goal reflects the increased number of shares held by AMC and the new preferred equity. In the beginning of APE trading, AMC and APE were down by $800 million in business value from the final price $18.01 as per the note. AMC ended the day at $10.46 and APE finished the day with a price of $6.

“While it makes little sense for APE to trade below AMC, we think that it reflects concerns over impending dilution,” Alicia Reese posted in a note from Tuesday. “AMC is pre-authorized to issue up to 4.5 billion additional preferred shares of APE to raise cash.”

AMC shares climbed 1.6 percent in the premarket session on Tuesday, whereas APE increased 9.2 percent.

AMC Entertainment’s brand-new APE securities – AMC Preferred Equity Units – opened trading this early in the morning, a turbulent session for the biggest exhibitor. The company’s stock plunged, falling 41 percent. The price was $10.46. It was slightly higher trading after the market.

APE units were handed out to AMC shareholders through their brokers beginning this morning. Shareholders receive one APE for every share of the common stock that they hold. The APES is expected to have the same value economically in terms of voting rights and value as the common stock, which was launched at $6.95. The market was briefly stopped after it climbed to $9.49 before exploding to above $10 before closing with a decline of over 13% to $6.

AMC attempted to inform investors of the possibility of a change in policy in an explanation note, followed by a tweet from the CEO, Adam Aron. “An investor should … expect that the price of a stand-alone share of common stock logically should at least initially decline, however, that investor’s economic interest will be the sum of the price of a share of common stock plus the price of an APE,” AMC announced.

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