Why AMC Stock Has Been on the ‘Threshold List’ for Weeks

According to AMC Entertainment (NYSE:AMC) CEO Adam Aron, AMC stock has been on the New York Stock Exchange’s threshold securities list for over three weeks now:

Many of you, and we, are aware that AMC Entertainment has been on “The Threshold List” for 3+ weeks, indicating a number of FTD’s. Some of you may be pleased to learn that we have contacted both FINRA and the NYSE asking that they both look closely at the trading of our stock.

— Adam Aron (@CEOAdam) March 7, 2023

Stocks included in the list have experienced a fail-to-deliver (FTD) rate of at least 0.5% based on total outstanding shares for five consecutive settlement days through a registered clearing agency of at least 10,000 shares. FTD occurs when a party in a contract fails to deliver at the time of settlement.

For short selling, FTD occurs when the short seller does not own some or all of the shares at the time of settlement. This can result in the creation of phantom shares, which can have a detrimental effect on share price. This is also known as naked short selling.

AMC Stock Remains on NYSE Threshold List

Abusive and manipulative short selling is illegal. At the same time, the U.S. Securities and Exchange Commission (SEC) notes that not all naked short selling is illegal. The commission states that “Because it may take a market maker considerable time to purchase or arrange to borrow the security, a market maker engaged in bona fide market making, particularly in a fast-moving market, may need to sell the security short without having arranged to borrow shares.”

Meanwhile, AMC’s special meeting of stockholders on March 14 is quickly approaching. At the meeting, shareholder votes for three proposals will be revealed:

Increase total authorized shares to 550 million from 524.17 million.

A reverse stock split in a 1-for-10 ratio. Along with proposal No. 1, this will allow AMC to convert AMC Preferred Equity Units (NYSE:APE) into common stock.

An adjournment of the special meeting if there are insufficient votes to approve proposals number one and two.

AMC has explained that the conversion of APE into common stock will only be possible upon the approval of both proposals No. 1 and No. 2. This is because proposal No. 1 will not authorize enough common stock to permit the conversion unless the reverse split is also approved. A reverse split will lower shares outstanding. Shareholders have expressed their concern about these proposals, although AMC is still planning on moving forward with them.

On the date of publication, Eddie Pan did not hold (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 InvestorPlace.com Publishing Guidelines. 

Eddie Pan specializes in institutional investments and insider activity. He writes for InvestorPlace’s Today’s Market team, which centers on the latest news involving popular stocks.

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