How will AMC's stock conversion and reverse split affect stock price and investors?

A Delaware court-approved settlement for converting $AMC Entertainment Preferred(APE)$ into common shares $AMC Entertainment(AMC)$ .

The conversion process will result in the merging of outstanding APE shares with the existing common shares of AMC, thereby potentially diluting the total share count by approximately 90%.

In a strategic move to mitigate the potential negative impact of dilution on share prices, AMC plans on implementing a reverse stock split to maintain its share price.

What's next for AMC after court approval of revised stock-conversion plan? - MarketWatch

How did Stock Conversion and Reverse Split affect stock price of $AMC Entertainment(AMC)$ ?

The journey of AMC shares has been characterized by substantial volatility over the past few months. This tumultuous trajectory began when the conversion plan was initially endorsed by shareholders in March. However, this momentum was abruptly halted in late July, generating a sense of uncertainty and speculation among investors.

Following the court's approval of the merger and the impending reverse stock split, AMC's equity structure is set for a transformation. The nearly one billion outstanding APE shares will be integrated with the existing 519.19 million common shares of AMC.

Scheduled for August 24th, this reverse split will consolidate every ten shares into a single share of higher value. This maneuver aims to sustain AMC's share price above the level typically associated with penny stocks. As a result, the company is making a proactive effort to balance the trade-off between dilution and stock valuation.

This consolidation of shares has reverberated through the stock market, causing AMC's share price to plummet by approximately 25% upon the news of the APE conversion settlement approval.

Impact of stock conversion on investors and $AMC Entertainment(AMC)$

While shareholders may experience immediate losses due to the dilution and share price decline, the overarching implications are strategically beneficial for AMC.

The company is poised to raise significant capital through this transformation, bolstering its financial health and warding off bankruptcy risks. Analysts have even projected that AMC could potentially raise up to $16 billion in capital.

The impact of the reverse stock split on stockholders is twofold. On one hand, the dilution resulting from the merging of APE shares and common shares is likely to lead to initial losses in share value. On the other hand, the reverse stock split aims to stabilize and potentially increase the share price post-consolidation.