AMC Entertainment (AMC) shares plunged lower Monday after the movie theatre chain's largest rival, Cineworld, confirmed it's considering a Chapter 11 bankruptcy filing in the United States.
U.K.-based Cineworld, which owns Regal cinemas in the U.S., hit a record low on Friday after the Wall Street Journal reported the Chapter 11 option, which the group said Monday is one of its options as it looks to reduce debts accumulated during the pandemic and its failed takeover of Canada-based Cineplex.
"Cineworld and Regal theaters globally are open for business as usual and continue to welcome guests and members," the company said in a statement to the London Stock Exchange Monday. "The strategic options through which Cineworld may achieve its restructuring objectives include a possible voluntary Chapter 11 filing in the United States and associated ancillary proceedings in other jurisdictions as part of an orderly implementation process."
"Cineworld is in discussions with many of its major stakeholders including its secured lenders and their legal and financial advisers," the statement added. "Cineworld would expect to maintain its operations in the ordinary course until and following any filing and ultimately to continue its business over the longer term with no significant impact upon its employees."
AMC shares were marked 38.9% lower in pre-market trading to indicate an opening bell price of $11.01 each.
Earlier this month, AMC posted a bigger-than-expected second quarter loss of 24 cents per share, on revenues of just over $1.1 billion, and planned to issue a special preferred share dividend that would carry the ticker symbol 'APE', a reference to retail stock traders that share information on the Reddit messaging board.
Each AMC shareholder will receive one APE preferred share, with some estimating the value at 1/20th of the AMC share price at the close of trading Friday. However, the official distribution from AMC suggests the APE dividend "designed to have the same economic value and voting rights as a share of common stock."
"It is more likely than not that the two securities, the common stock and AMC Preferred Equity units will trade as two separate securities for quite some time to come," AMC said.
Those so-called APE shares -- which will eventually convert into AMC common stock -- will be distributed Monday and trade independently. However, their conversion potential, which is subject to vote by APE shareholders, will dilute the outstanding value of AMC shares, adding to the downward pressure in early Monday trading.
