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Why AMC Entertainment Stock Jumped as Much as 6% Today

What happened

Shares of movie theater operator AMC Entertainment Holdings (NYSE:AMC) were higher by 6% at around 11 a.m. EDT. After that swift rise, however, the stock began to cool off some, only holding on to a 1.5% gain by 2 p.m. EDT. There was a notable update from the company, but it really doesn’t change the big picture story here, so it makes sense that the stock didn’t hold on to its early advance.

So what

AMC issued a convertible bond two years ago. When sold, the conversion rate was set at 52.7704 shares of Class A common stock per $1,000 principal amount of the convertible bond. However, there was a reset provision that triggered on Sept. 14, the two-year anniversary, because the stock has traded materially below a contractual price level. As such, the conversion rate is now set at 74.0381 shares per $1,000 principal amount.

Based on this change, and assuming conversion of the 2026 notes, Silver Lake, a global technology investment firm, would end up receiving stock worth 30% of AMC outstanding shares and 18.5% of voting power at the company. (Silver Lake owns additional shares in AMC outside of this convertible security, as well.) In addition to the change in the conversion rate, Dalian Wanda Group has forfeited some of its AMC shares to AMC and they will be canceled if the convertible notes are, in fact, converted at their maturity in 2026.   

Image source: Getty Images.

There are a lot of moving parts here but investors shouldn’t get too caught up in the details. Effectively, because AMC’s stock has been languishing at such a low level, a reset was tripped in a convertible bond that will likely end up giving Silver Lake more say at AMC. Whether or not that’s good news isn’t really

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