AMC and APE from a Securities Lending Perspective | Part 2
March 14, 2023
Keith Min, DataLend Product Specialist
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.
Utilization for AMC common shares remained near 100%, however APE preferred shares briefly reached 93% utilization on January 31st before tapering to 82% utilized as of March 2nd. This decrease in utilization was largely due to a reduction in shares on loan in the lender-to-broker market and perhaps not surprisingly, this dip coincided with the drop in the underlying price of APE from its peak of $3.16 in early February.
News surrounding AMC Entertainment never rests. With the April 27th hearing looming, the next month and a half is pivotal in the future of the theater chain. Stay up to date with insights from the securities lending industry on AMC Entertainment and over 189,000 other securities by subscribing below.
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