Is reverse stock split coming for AMC? Here is what it means to price

on Dec 23, 2022
  • AMC stock crashed on Thursday after the reverse stock split news.
  • Analysts expect AMC to fall amid APE units converted into common stock.
  • The stock maintains a descending trendline with room for further decline.

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AMC Entertainment Holdings, Inc. (NYSE:AMC), a stock loved by retail investors, is having a rough time. The shares closed down nearly 8% on Thursday on stock market news that did not excite its fans. 

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According to the latest announcement, AMC would initiate a 1-for-10 reverse stock split. The stock split would see the sock trade in upwards of $40. AMC exchanged hands at $4.91 as of press time. The news was negatively read by investors, pushing the stock down.

The Thursday announcement by the ailing movie theatre chain also indicated AMC was selling its APE units. APEs represent units of preferred equity of AMC. Over 100 million APE units would be converted into the common stock of AMC at $0.66 per share. That would see $110 million in capital injection to retire the company’s debt due in 2026.

But renowned short investor Jum Chanos has a piece of advice for investors. If the proposal passes, Chanos expects APE shares to be bullish and AMC bearish. He says with AMC currently trading at over $4 and APE at $1, the move would see their prices converge. That was also clear from AMC CEO Adam Aron, who expects shareholders’ approval to address the spread. Investors read this quickly, pushing APE higher, closing up 75% on Thursday.

AMC trapped in a descending channel as momentum weakens

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AMC Stock Chart by TradingView

AMC stock trades in a descending channel. The MACD indicator has remained in bear territory and shows weak momentum. 

When to buy AMC?

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Buying AMC stock in the current bear market is not recommended. The latest news is another bear trigger if AMC shareholders approve the proposed move. 

The possible support zones for AMC are $3.9 and $1.44. The region between the two price levels would interest investors looking to invest in AMC stock.

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