AMC and APE from a Securities Lending Perspective Part 2

When we first visited AMC common shares and APE preferred shares last month, an arbitrage opportunity arose as an upcoming vote to merge both issues came with a hefty $3.49 spread. Since then, a class action lawsuit was filed against AMC Entertainment, Q4 earnings reiterated the need to raise capital, and just recently, shareholders approved the merger of both issues following a 1-10 split on APE. A completed merger is subject to a hearing in late April but nonetheless, the securities lending market experienced heavy volatility across both issues.  

As of January 26, the average fee for new loans of AMC common shares increased by 219% from December 21, a day before the restructuring plans were announced. However, one week after our initial report, fee volatility struck as new positions on February 2 were 10x more expensive to borrow over the December 21 baseline. Fees for new loans immediately began to crash to a February low on the 10th to a 305% increase over the benchmark date before reaching 15x on February 16th, and 19x on February 21st. A day prior to the share approval, the average fee for new loans “settled” to a 175% increase over the late December benchmark.