After ‘APE’ units make trading debut, AMC price target cut at Wedbush

AMC Entertainment Holdings Inc.’s AMC, -4.45% AMC Preferred Equity Units APE, +10.38% made their trading debut Monday, ending a volatile session down 13.7%, outpacing the S&P 500 Index’s SPX, +0.03% decline of 2.1%. AMC’s stock ended Monday’s session down 5.5%. Following the APEs’ debut, analyst firm Wedbush cut its AMC price target. “On August 22, AMC Preferred Equity (Ticker: APE) began trading, and we adjusted our model for the higher share count of AMC, thus lowering our price target to $2 from $4,” wrote Wedbush analyst Alicia Reese, in a note released Tuesday. The move effectively created a two-for-one stock split with with half listed under AMC and half under APE, Reese added. “At the end of APE’s first day of trading, the combined shares lost $800 million in enterprise value from Friday’s closing price of $18.01, with AMC ending the day at $10.46 and APE at $6.00,” Reese added. “While it makes little sense for APE to trade below AMC, we think that it reflects concerns over impending dilution.” The analyst noted that AMC is pre-authorized to issue up to 4.5 billion additional preferred shares of APE to raise cash. “We expect AMC to wait for APE shares to stabilize with AMC, then issue a portion of its authorized APE shares for cash to pay down the majority of its outstanding debt,” she wrote. AMC stock rose 2% in premarket trading on Tuesday while the APE equity gained 10%. Of eight analysts surveyed by FactSet, three have a hold rating and five have a sell rating.