In addition, the next twist of events could always be favorable for APE conversion chances. 27 hearing may be less-surprising, and result in a much smaller jump (if any) for the stock. 6 quashing of the settlement offer was more of a surprise for the market, explaining the resultant 21% surge for AMC that trading day. However, while this may sound like a fast money opportunity, remember that, like the arbitrage trade, it has its own caveats.įor one, the Apr. If the outcome of next week’s court hearing signals further delays in the share conversion, another squeeze may be in the cards for AMC stock. That’s when the next scheduled court hearing is expected to occur. Another such reduction may be on the cards for Apr. This corresponded to a squeeze higher for AMC stock. 6, resulted in some arbitrageurs unwinding their positions. Additionally, further roadblocks to the conversion, such as this litigation, dampen the appeal of the trade.Īdverse developments, such as the quashing of the settlement plan on Apr. That’s actually down in recent days, which tells investors all they need to know about shorting either of these names. Borrowing fees short-sellers need to pay are at triple-digit percentage levels. Yet, while this seems like easy money on paper, in practice, it’s a bit more complicated than that. When the conversion is completed, they’re hoping to pocket the massive spread (AMC trades for around $5 per share versus $1.53 per share for APE). However, the preferred shares have traded at a sharp discount to the common shares.Īs a result, risk arbitrage investors, like hedge funds, have entered long positions in APE and short positions in AMC. APE was initially issued on a one-to-one basis with AMC stock. So, how exactly can average investors potentially profit from the turn above of events? It all has to do with the arbitrageurs I mentioned above. This means the “APE Saga” continues, which may have created a new reason to buy AMC shares. However, a Delaware Chancery Court quashed the settlement plan two days later. 4, it appeared as if the plaintiffs were willing to accept their offer. However, the company cannot proceed with the rest of its plans until the litigation is settled.Īgain, management attempted to settle this suit. They argue that due to the prior sale of additional common shares of AMC stock, the company hit its authorized share count limit.ĪMC was able to obtain shareholder support for the APE conversion plan, along with approval for its project to reverse-split the stock (enabling the conversion to happen and for AMC to continue with dilutive capital raises). Additionally, the company did this without having to obtain the support of existing shareholders. In the suit, these shareholders allege that the company created and sold the APE equity units to implement further heavy shareholder dilution. 20, a group of AMC investors filed suit against the company in Delaware Chancery Court. A New Reason to Buy AMC Stockīefore entering the potential trade that has emerged with AMC Entertainment, let’s look at the backstory. However, whether it is worthwhile to make this trade is another question entirely.
That’s because these events may result in yet another “short squeeze” for shares.
This has been frustrating for management and frustrating for “smart money” investors trying to arbitrage the transaction (more below), However, everyday individual investors, in theory, may have a chance to make a quick profit from this latest twist of events. Unsuccessful in its efforts to settle this litigation earlier this month, this conversion implementation has been delayed. There are many ways to “play” AMC Entertainment (NYSE: AMC), but one that may be piquing the interest of retail traders today has to do with the latest news regarding the conversion of AMC Preferred Shares (NYSE: APE) into common shares of AMC stock.Īs you may be aware, there has been some legal controversy regarding the planned APE stock conversion.
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