The stock market looked poised to get off to a poor start for the new week. Investors are bracing for the latest from the Federal Reserve, with its annual symposium in Jackson Hole, Wyoming, sure to offer insight into the thinking of those making monetary policy. Stock futures were downbeat, with futures contracts on the Dow Jones Industrial Average (^DJI -0.98%) having fallen 337 points to 33,369 as of 8:30 a.m. ET. Futures on the S&P 500 (^GSPC -0.46%) had fallen 51 points to 4,181, while Nasdaq Composite (^IXIC -0.64%) futures had dropped 206 points to 13,062.

Meme stock investors were focused entirely on the latest news from AMC Entertainment Holdings (AMC), and many people in the investing community seemed confused by the extreme moves in its stock price. AMC shares were down more than 35% in premarket trading on Monday, but given the move it made over the weekend to distribute new shares to investors, that was actually better news than many might have expected.

AMC goes APE

Over the weekend, AMC finalized its plan to distribute new shares to its current investors. However, rather than doing a simple split of its common stocks, AMC decided to use a slightly different tactic.

Those who owned AMC shares on Friday, Aug. 19, were entitled to receive what the company called an AMC Preferred Equity unit, or APE for short. Although the word "preferred" in the name would typically suggest that the new shares would have different characteristics from the common stock, that isn't the case here. The announcement regarding the dividend explicitly stated that each APE is designed to have the same economic value as the common stock, with the same voting rights.

The reason for the move has to do with limitations that shareholders had placed on AMC. When the meme stock started to move higher, AMC made successive secondary stock offerings to raise cash and take advantage of the elevated stock price. However, the movie theater operator ran up against the limitation on the number of shares it could issue. It sought shareholder approval to boost the number of authorized shares it could issue, but after getting pushback from some investors, the company withdrew its attempt to do so.

Although AMC's corporate documents limit its ability to issue common stock, they allow for the issuance of preferred stock. AMC has taken advantage of that provision through its APEs, which it has distributed via its stock dividend effective today.

The next step?

AMC has said that the APEs are convertible into common stock, but only if the AMC board of directors makes a proposal to increase the number of authorized shares of common stock. Shareholders would then have to vote to approve the increase. In the absence of that -- and AMC has said it doesn't expect to make such a proposal anytime soon -- APEs and AMC common stock could continue to trade as separate securities well into the future.

If AMC had done a simple 2-for-1 split of its common stock, then one would have expected its share price to drop by 50% after the split took effect. The APE dividend achieves much the same purpose, giving one APE unit for every AMC share held. The fact that AMC stock has fallen by only 35% rather than 50% is a positive sign for the stock.

However, there's one missing piece of the puzzle: How much investors will be willing to pay for APEs. With equivalent rights and economic value, APEs and AMC common stock should arguably trade at similar values. However, there's potential for disparities if investors either distrust the new APE format or see it as more attractive than common stock.

AMC expects trading in APEs to start Monday morning, although a delay beyond the 9:30 a.m. ET opening time could occur. With investors spending so much time looking closely at AMC lately, the new stock is likely to be the focal point of the entire trading day.