AMC Issues APE Stock Dividend: Here's what you need to know.

AMC Issues APE Stock Dividend: Here's what you need to know.

AMC stock just tanked by over 40%, meaning that AMC is dead... right? Thankfully, that’s wrong.

On paper, AMC stock looks like it took a pretty hard hit this past week. But, that’s because AMC decided to pay out dividends on their stock in the form of $APE shares, or $AMC preferred equity, meaning it’s a preferred share. This means that if AMC were ever to declare bankruptcy, it would pay off its debts first, and then $APE holders, then $AMC holders last. And what they did was give any shareholder who held $AMC an equal number of $APE shares. So, what really happened was $AMC, which was trading right around $18 before the dividends were released is now trading at $11, and $APE is trading at $7. Therefore, when you combine them together, shareholders did not suffer a loss. Instead, the value of their initial shares is now just split between two shares. In fact, AMC shareholders actually saw a slight gain on the day when this split happened.

So what’s the point of doing this?

Well, for AMC, the $APE shares will allow them to raise a lot more capital than the $AMC shares would allow. This is because, with $APE shares, they don’t need shareholder approval to have the right to sell more shares in the future. AMC created about a billion of these $APE shares and only distributed around half of those during this dividend, meaning that they still have around 500 Million $APE shares that could be sold at any time. However, it’s not guaranteed that investors will want to pour more capital into AMC because it seems like a lot of investors don’t believe in AMC succeeding on a fundamental level. For a lot of people, it was a meme stock that went sky high when it felt like money was just growing on trees. But, we’re in a much different economic state at the moment, so it’s going to be interesting to see if this actually becomes a successful move for AMC. However, only time will tell, and we’ll just have to wait to find out.