AMC stock sinks, APE shares surge amid stock conversion settlement

Yahoo Finance Live anchors Brad Smith and Jared Blikre discuss the decline in stock for AMC.

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BRAD SMITH: Another major company that we're tracking here on the day, we've got to talk about AMC. AMC stock sinks as its preferred shares surge after the movie-theater chain reached settlements to proceed with converting its AMC preferred equity units, also known as those APE units, into common shares here.

And now this had been going on in terms of the proceedings for quite a bit here, and we remember last year-- last August specifically when those APE units started to trade ultimately as a response to try and shore up even more kind of fanfare or like, you know, kind of an exclusive offering, if you will, for the most loyal of the AMC shareholders that wanted to get further into or [? next ?] even more so of their portfolio interest into AMC and the meme-stock frenzy that had ensued around it. But at the end of the day, this had really caused a divergence in the belief that management was actually doing the right thing here because there was that dilution of shares that was also taking place.

JARED BLIKRE: I think that's the real thing, and that's what's been driving the share prices. And I think this opens the door, and I've seen some analyst commentary as well that supports this. I think this opens the door to greater shareholder dilution in the future. Sorry, but I just see that coming here, and this is kind of the gateway is just being swung open here.

If we go to the YFi Interactive, I do have the AMC common shares versus the preferred, and you can see the twists and turns that they've taken. This at the end, this is a percentage-basis chart, so this doesn't mean that they've converged precisely. Just kind of an artifact of the presentation, but just want to show you all the volatility. Sometimes they were moving in opposite directions. Sometimes they were moving in the same direction. And now they are finally converging to the point where there's going to be some resolution.

But I think this just opens the door toward more share issuance in the future, which means greater dilution, which means potentially lower share prices.