Breaking Down The Ape Dividend via /r/wallstreetbets #stocks #wallstreetbets #investing


Breaking Down The Ape Dividend

This is the first time I've written here but I feel it's important enough to bring awareness to how this dividend will be handled. I'm by no means an expert on anything. My wife's boyfriend had to read the documents to me, but if you'd like a background, I've written a few pieces of DD elsewhere including breaking down the Credit Suisse report last year. Anyways, not financial advice. I'm not here to tell you whether you should be in anything or not, that's fully your choice. I'm merely going to interpret the data as given.

Let's start with the announcement:

https://investor.amctheatres.com/newsroom/news-details/2022/AMC-Entertainment-Holdings-Inc.-Announces-Special-Dividend-of-AMC-Preferred-Equity-Units/default.aspx

There is A LOT to unpack here, but I'm going word for word in their official documentation and will try to break it down in finer detail.

LEAWOOD, Kan.–(BUSINESS WIRE)– AMC Entertainment Holdings, Inc. (NYSE: AMC) (the “Company,” or “AMC”), announced today that it has declared a special dividend of one AMC Preferred Equity unit (an “AMC Preferred Equity Unit”) for each share of AMC Class A common stock, par value $0.01 per share (the “Common Stock”), outstanding at the close of business on August 15, 2022. The special dividend is expected to be paid at the close of business on August 19, 2022.

The Company has applied to list its AMC Preferred Equity Units on the New York Stock Exchange (“NYSE”) under the symbol “APE” starting August 22, 2022 and each AMC Preferred Equity Unit is designed to have the same economic and voting rights as one share of Common Stock.

The AMC Preferred Equity Units can convert into Common Stock, but only if the Company proposes and investors vote to approve an increase in the number of authorized shares of Common Stock, in an amount at least sufficient to permit the conversion of the AMC Preferred Equity Units into Common Stock (through a “Common Stock Amendment”).

Regarding the dividend, Adam Aron, AMC Entertainment Chairman and CEO commented, “Today we are rewarding and recognizing our passionate and supportive shareholders, both to our shareholders in the U.S. and internationally, with a dividend of AMC Preferred Equity units that will trade on the NYSE under the ticker symbol APE. Shareholders will receive one AMC Preferred Equity unit for each company issued share of AMC common stock that they own. This means that based on our 516,820,595 shares outstanding, we will be issuing a dividend of 516,820,595 AMC Preferred Equity units.”

So this the first part telling you how it's going to happen. A new ticker will be created August 22, $APE with a total number of 516,820,595 "units." While it isn't common stock in the parent company (AMC), it shares the same economic and voting rights as one share of Common Stock. What does this mean? It means that if you have 1 AMC and 1 APE, you now hold 2 shares worth of voting power in corporate actions. It also means that August 22, AMC and APE are going to start off with a shared a market cap.

EXAMPLE

August 21, AMC closes at $22.00.

August 22, AMC opens at $11 and APE opens at $11

Same market cap, split in half between two tickers. Don't take my word for it though, Adam Aron went on a FUD cleaning spree earlier. Let's see what he says: https://twitter.com/CEOAdam/status/1555946487384866817

https://preview.redd.it/vej8gulrv6g91.png?width=596&format=png&auto=webp&s=3f14c77f0777e8db72a0ac6dd1e0e940c067cc0a

You're being given 1 APE share for 1 AMC share and then the stock price of AMC drops in half the following day. In other words, a stock split via 2 tickers. Remember APE and AMC both have the same economic and voting power in corporate actions. It's not really a dilution if you redefine it right? Thanks for that lesson J-Pow and co…

I can already hear the screeches… "BuT tHeY'Re OnLy GiVeN To ShArEhOlDeRs." Bless your heart, let me take you down a side track real quick. DRS over in that sub is relatively hit and miss. While there is no official count, as is the case in GME when they include DRS numbers in quarterly reports, let's say 25% is directly registered with the remainder being held in broker accounts. Got some bad news for you, if only 25% is directly registered, that leaves 75% registered in "street name" whether they are bought or not. The name of the DTC Nominee is CeDe and Co. So while they're technically correct, and only given to shareholders, the full number is still distributed. All 514,000,00 of them. Don't take my word for it here either tho.

https://www.computershare.com/us/becoming-a-registered-shareholder-in-us-listed-companies

https://preview.redd.it/tsoaw91tv6g91.png?width=943&format=png&auto=webp&s=812d9d6b66c84550a60e0788ff15755c0d52b97a

Whatever you choose to call it, there is the first dilution since your AMC shares start at half price on August 22. Here's the kicker, you as the shareholders will have to approve the amendment to dilute next year in order to redeem your 1 APE for 1 AMC.

The AMC Preferred Equity Units can convert into Common Stock, but only if the Company proposes and investors vote to approve an increase in the number of authorized shares of Common Stock, in an amount at least sufficient to permit the conversion of the AMC Preferred Equity Units into Common Stock (through a “Common Stock Amendment”).

If the Common Stock Amendment is adopted by shareholders, each AMC Preferred Equity Unit will convert into one share of Common Stock and such Common Stock will be distributed upon conversion to holders of AMC Preferred Equity Units on a one-to-one basis (one share of Common Stock for each AMC Preferred Equity Unit held).

There is your second dilution. If the majority of APE is still in CeDe and Co, there is enough voting power to approve the dilution next year. Invest in what you want, but DRS your shit. This is my last attempt at bringing data to the ultra smooth.

Peace

Submitted August 07, 2022 at 02:52AM by DigitalArts
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