We can put off the mean stock madness of 2021 as a one-time thing to the extent of how high stocks were shooting up. Those types of gains haven’t been repeated once, but it’s completely wrong to say that it didn’t change the course of history in the stock market. Companies directly linked to meme rallies have now been presented with options to save their sinking ship, and some are putting on their live vest in some very unique ways.
AMC is likely the second most popular meme stock in history behind GameStop, and they fully invested into their reputation. On Monday, the highly awaited APE shares entered the market, also known as AMC preferred units. Yes, APE is the ticker, and it’s a reference to the name retail traders call themselves. APE is essentially a jacked dividend being given to shareholders of AMC, where they get one unit of APE for each share of common stock they own. In theory, this is a two-for-one stock split, as investors are getting two shares for every one AMC share they own. But you might be wondering, why don’t they just stock split then? AMC has reached their limit of issued shares or the portion of shares that the company has sold are put into the market. As adding shares would dilute the value of each existing share, AMC went with the loophole that allowed them to issue 517,000,000 APE shares that are each equivalent to an AMC share, while still abiding by the rules regarding selling shares. AMC can now raise more money through stock sales, allowing them to pay more debts off and acquire more assets. AMC stock collapsing in the past few days likely has nothing to do with negative sentiment, but instead the introduction of APE shares as it’s still operating with the purpose of a two-to-one split, which halves the share price.
It’s a creative method, but it needs to be executed well for its purpose to be served and analysts downgraded their expectations for the stock as they believe this is a desperate plea for cash from the company. Regardless, AMC is tapping into their mean potential and we’ll see how strong that truly is.
I am not a financial advisor and my comments should never be taken as financial advice. Investments come with risk, so always do your research and analysis beforehand.