AMC surges ahead of $APE stock dividend despite weak movie theater traffic

AMC’s CEO is putting on his best Maverick impression — telling his loyal investors to believe in him as he pushes AMC beyond its limits. His plans to issue new $APE shares have analysts divided over the company’s future.

Theater traffic remains well below 2019 levels

Summer blockbuster Top Gun: Maverick shattered records — topping Titanic as the seventh all-time grossing film domestically.

• Summer box office sales topped $3B — but remained 17.5% below 2019’s pre-pandemic summer sales.
• There were 36.5% fewer movie releases this year vs. pre-pandemic years.

Theater foot traffic spiked in December, coinciding with the release of Spider-Man: No Way Home. But even during the Christmas week of 2021, traffic was still over 30% lower than in 2019.

Traffic has steadily dropped this year, and August and September are expected to be even slower. Despite the data, North America’s largest theater chain AMC — has seen its stock more than double from mid-May, but not because its theaters are doing so well…

Struggling theater chain turned meme stock

Last year, AMC wanted to sell stock to raise money, but shareholders shut down those plans — worried existing shares would get diluted. But AMC’s CEO found a workaround — creating a new class of preferred shares with the ticker $APE.

• First, AMC will distribute a portion of the APE shares (~517M) as “dividend stock.”
• This means that for every one $AMC share owned, investors will receive one $APE share.

When the new shares are in place, AMC’s CEO can raise money by selling up to 4.5B additional $APE shares — at the expense of existing shareholders.

Per Wedbush analyst Alicia Reese, this is essentially a two-for-one stock split (MW) which are mere cosmetics and shouldn’t create additional value. So why did AMC rise 30% since the announcement? Evidence points to the recent momentum in meme stocks.

Investors: Don’t think, just do

According to analyst Rich Greenfield, AMC’s CEO “found followers who don’t really understand what they’re investing in.”

• Bear: Greenfield thinks these new shares let AMC “dramatically dilute shareholders” — saying AMC’s CEO is “spinning reality” (YF!).
• Bull: Reese thinks the move could make AMC a better long-term investment if the cash raised from $APE pays down AMC’s massive $5.5B debt.

On a price-to-sales multiple — AMC is trading over 3x more expensive than competitor Cinemark. But we already knew meme stocks rarely trade on fundamentals.