Stock Market

A Big Player Just Sold a Boatload of APE Stock. Should You?

There are a couple of ways to invest in global movie-theater chain AMC Entertainment (NYSE:AMC). You could buy AMC stock, or you could own AMC Preferred Equity Units (NYSE:APE). Either way, you’ll definitely want to consider the risks. One firm is in the process of dumping millions of shares of APE stock, and this might turn out to be a smart move. Unless you’re a thrill-seeking gambler, you might want to divest your own share position in AMC Entertainment.

You may have heard about AMC Entertainment’s difficulties in trying to convert APE units to common stock shares. It’s been like a soap opera, and I highly recommend reading Thomas Niel’s play-by-play account of the ongoing legal battle.

You’ll want to keep tabs on that legal tug-of-war if you plan to hold APE units for the long term. Just as importantly, you’ll need to watch for developments with AMC Entertainment and its financial backers. As one firm sells its APE units and another one divests its AMC shares, the perma-bulls might want to reconsider their own positions today.

This Firm Keeps Selling APE Stock

Before we talk about APE stock, there’s a related development that’s worth mentioning. In particular, Bridgewater Associates, which famous billionaire Ray Dalio founded, sold its entire position in AMC stock during the first quarter of 2023.

Suffice it to say, Dalio knows a thing or two about the financial markets. Does he know something about AMC Entertainment that the bulls aren’t seeing? It’s a question worth considering — and besides, there’s another firm that’s backing away from its long position in the movie-theater chain.

I’m referring to Antara Capital, which has reportedly sold millions of APE stock units on multiple occasions. Antara’s share sales are somewhat complicated to keep track of, so I recommend starting with InvestorPlace Assistant News Writer Eddie Pan’s first report and then following up with his more recent article on this.

Pan observed that Antara Capital held 227.32 million APE units as of Feb. 15, but that figure dwindled to 146.2 million units after a series of sales. This, by itself, might not be a reason to divest your own APE and AMC shares, but it’s certainly a cause for concern.

Prepare for Uncertain Outcomes With AMC Preferred Equity Units

Ultimately, a stake in AMC Preferred Equity Units is an expression of belief in the future of AMC Entertainment. So, don’t buy and hold APE stock unless you expect the company to thrive in 2023 and beyond.

There are signs that AMC’s movie theaters are getting a decent amount of foot traffic. Furthermore, AMC Entertainment’s new $3 theater ticket promotion might increase the foot traffic during the coming weeks and months. That remains to be seen, though.

At the very least, the bulls can point to AMC Entertainment’s year-over-year revenue growth and the company’s narrowing earnings loss. They might also be optimistic about AMC’s expansion of its branded popcorn to 2,600 Walmart (NYSE:WMT) stores. But again, only time will tell whether this will move the needle in terms of AMC Entertainment’s top- and bottom-line results.

Consider the Risks Before Buying APE Stock

Even though the company is improving in certain respects, AMC Entertainment’s future is uncertain. It’s possible that Dalio and Antara Capital simply didn’t want to remain exposed to the risks associated with AMC Entertainment.

It’s not a terrible idea to invest in APE stock, as long as you’re prepared for potential capital loss. The APE unit price has gone practically nowhere for several months. However, you’ll need to be ready for volatility to pick up at any given moment.

Thus, the best strategy for risk-tolerant traders would be to take a very small position in AMC Preferred Equity Units. And if you’re more cautious, then you don’t have to own any AMC or APE shares/units at all.

On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the Publishing Guidelines.

David Moadel has provided compelling content – and crossed the occasional line – on behalf of Motley Fool, Crush the Street, Market Realist, TalkMarkets, TipRanks, Benzinga, and (of course) He also serves as the chief analyst and market researcher for Portfolio Wealth Global and hosts the popular financial YouTube channel Looking at the Markets.