Did China's Wanda Cash in During AMC Theatres' Stock Surge?

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A regulatory filing reveals that the Beijing-based company, which owns a controlling stake in AMC, recently executed a share conversion "to permit sales of its common stock" in the U.S. theater giant.

Was Chinese conglomerate Wanda Group among the surprise beneficiaries of the recent retail investor frenzy that caused a spike in the stock price of movie theater giant AMC Entertainment?

A U.S.-based division of Wanda converted its Class B common stock in AMC to Class A shares on Monday, Feb. 1, "in order to permit sales of its common stock," AMC revealed in a filing with the Securities and Exchange Commission on Friday. It didn't detail the amount of stock converted. (AMC Entertainment is the company's official name, but it operates under the brand AMC Theatres.)

The filing also didn't indicate whether Wanda immediately exercised the right to sell its AMC shares, and a representative of the conglomerate's Beijing office told The Hollywood Reporter on Monday that they would look into the matter but would require some time to comment.

AMC's stock climbed as high as $17.25 on Feb. 1, which was more than four times where shares were trading in late January, before the Reddit Wall Street Bets group began hyping the stock. It has since fallen below the $10 mark, closing the week at $6.83.

As a major shareholder, Wanda would be required to disclose to the market if it offloads a large chunk of its stake in AMC, but such a notice wouldn't have to be issued immediately.

The Friday filing with the SEC shows that the Chinese firm sacrificed some voting power when it executed the share conversion, though. "Prior to the conversion, Wanda as the holder of shares of Class B common stock was entitled to three votes per share of Class B common stock on any matter submitted to a vote of the Company’s shareholders. As a result of the conversion, all holders of Class A common stock have only one vote per share on all matters subject to a shareholder vote." Typically, an investor wouldn't sacrifice voting power without the intention of acting on a sale opportunity.

The share conversion may mean that Wanda has given up majority control over AMC.

Wanda has owned a controlling stake in AMC since 2012, when it bought majority control of the exhibition giant for $2.6 billion, which at the time was the largest international acquisition ever by a private Chinese company. The Beijing-based firm pared its stake in AMC in 2018 through a deal with private equity firm Silver Lake, but it maintained control of the theater chain through the dual share structure. Recent SEC filings showed that Wanda held approximately 58.8 percent of the voting power of AMC's stock, despite owning much less than 50 percent of the company.

Silver Lake has already reaped its own gains from the social media stock surge in AMC. With the exhibition chain's stock jumping to nearly $20 per share on Jan. 27, the firm elected to convert its $600 million bond into AMC stock at a conversion price of $13.51 per share, according to a regulatory filing. The move lightened AMC's debt load by $600 million, but also saw the company issue more than 44.4 million Class A shares to Silver Lake, giving the private equity firm an instant gain of $284 million.

Led by mercurial Chinese billionaire Wang Jianlin, Wanda Group runs a vast commercial real estate company in China, as well as the country's largest domestic movie theater chain. It sold off much of an expansive international portfolio beginning in late 2017 after a government crackdown put pressure on its debt load. But it still owns Hollywood movie producer Legendary Entertainment, Australian cinema chain Hoyts Cinema, British mega-yacht builder Sunseeker, and several other sizable entities.

At home in China, Wanda's domestic film studio is preparing for the imminent release of the tentpole comedy sequel Detective Chinatown 3. The movie opens Friday, the first day of the Lunar New Year holiday. The film has already sold over $55 million worth of advanced tickets and is expected to open to over $200 million.