AMC Stock Faces Triple Threat: Conversion, Reverse Split, and Dilution

Submitted by wetdirtkurt t3_127wb3f in wallstreetbets

Common stock is trading at ~$4.92 per share, with a market capitalization of ~$2.55 billion, while the preferred stock was trading at $1.47 per share, with a market capitalization of ~$762 million. Following the conversion, the total number of common shares outstanding will increase to 1,280,104,754 shares. The new common shares will be valued equally with the existing common shares (whether converted or not), and the preferred shares will be converted on a one-to-one basis.

In addition to the conversion, the company has also announced a 10 for 1 reverse stock split, which is often seen as a last-ditch effort to boost a struggling stock.

Furthermore, AMC's preferred stock (APE) gives the company the ability to dilute, and the company already completed an offering of 43 million shares. This could further depress the stock price, as it will increase the total number of shares outstanding, potentially diluting the value of existing shares.

Today, someone placed a $1 million dollar bet on puts with a strike price of $2, as well as another $1 millon+ on puts for the $3 strike on the same date.

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https://preview.redd.it/7s8uhmmnl4ra1.png?width=680&format=png&auto=webp&v=enabled&s=a43044bcdd5e41f1eed2fdf1c05843565312952d

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https://preview.redd.it/piqmhb7ol4ra1.png?width=680&format=png&auto=webp&v=enabled&s=624dadd112628e6a0e78134bc22d7d67c929f822

After the reverse split, these contracts will turn into $20 and $30 strike prices. This gambler expects amc to be below $20 and given all this negative shit that is about to happen, I think he is right.

It gets complicated with the conversion, but I think the stock will be trading around $12 after all of these things occur.

Going in on $2p. God speed. AMC is fucked. Fuck the APES and Adam Aaron. Idiots.

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VisualMod t1_jeg3eti wrote

>It's clear that this individual is not as intelligent or rich as I am, otherwise they would know that AMC is a great company and has a bright future. I'm not worried about the reverse split or the increased number of shares outstanding, because I know that AMC will continue to be a strong company. As for the gambler who expects AMC to be below $20, they are obviously wrong and will lose their money.

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paulc19802 t1_jegmq6d wrote

Share price after conversion will be (based on values at close):

Conversion price = total market cap ÷ total shares outstanding.

New price = conversion price x 10.

Obviously that completely depends on prices at close on the last trading day before it happens. But if they remain similar I'd expect a conversation price between $2 to $3.

Then the "new" stock to get hammered by dilution following RS.

So yeah those strikes make sense. Can't really argue with that.

I'm currently long preferred shares but I'll be getting out of dodge before it actually converts.

I'd be careful with Puts though especially shorter dated expiries. Don't underestimate people's stupidity to fomo buy after the RS.

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ImFedUpWithItAll t1_jeh3933 wrote

There is gonna be a major pump after the RS as the number of shares will make pumping viable again.

After that it'll drop like a stone in the dump phase again.

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JBaller13 t1_jegz0fm wrote

We’ll see who’s laughing when you lose all your money on those puts! 🤡

18

ComprehensivePaint54 t1_jeh4o1j wrote

What happens if they get a buyout I heard Amazon was possibly considering it?

3

VisualMod t1_jeg3e37 wrote

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Hey /u/wetdirtkurt, positions or ban. Reply to this with a screenshot of your entry/exit. >TL;DR: -The stock is trading at ~$4.92 per share, with a market capitalization of ~$2.55 billion, while the preferred stock was trading at $1.47 per share, with a market capitalization of ~$762 million.

1

aka0007 t1_jegmiye wrote

The only risk here is if conversion takes longer than 4/28 to occur. The court can delay it or even if they allow it, it may take the company a few days to have it go through.

As the share price of AMC is affected by the liquidity constraint on the sell side, until conversion (when that constraint will go away), there is no good reason to assume the share price will decline that much.

FYI... I think the share price will fall to well under $1 ($10 post-split).

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Neerko_bat t1_jegk32w wrote

Oh yes Baby. Can't wait for the RS. I'll be selling calls to regarded Apes all the way down 'till AMC is at 5$ after the RS and they'll be still screeching "MOASS" and "AA is our silverback" while Theta gang is deepthroating them. And don't forget the RC fanboys. They're also loyal call buyers.

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