copyright transfer explained

Published By Stanford Copyright and Fair Use Center

Chapter 2. copyright ownership and transfer.

Copyright Ownership and Transfer

• 201. Ownership of copyright
• 202. Ownership of copyright as distinct from ownership of material object
• 203. Termination of transfers and licenses granted by the author
• 204. Execution of transfers of copyright ownership
• 205. Recordation of transfers and other documents

§ 201. Ownership of copyright 1

(a) Initial Ownership. — Copyright in a work protected under this title vests initially in the author or authors of the work. The authors of a joint work are coowner of copyright in the work.

(b) Works Made for Hire. — In the case of a work made for hire, the employer or other person for whom the work was prepared is considered the author for purposes of this title, and, unless the parties have expressly agreed otherwise in a written instrument signed by them, owns all of the rights comprised in the copyright.

(c) Contributions to Collective Works. — Copyright in each separate contribution to a collective work is distinct from copyright in the collective work as a whole, and vests initially in the author of the contribution. In the absence of an express transfer of the copyright or of any rights under it, the owner of copyright in the collective work is presumed to have acquired only the privilege of reproducing and distributing the contribution as part of that particular collective work, any revision of that collective work, and any later collective work in the same series.

(d) Transfer of Ownership. —

(1) The ownership of a copyright may be transferred in whole or in part by any means of conveyance or by operation of law, and may be bequeathed by will or pass as personal property by the applicable laws of intestate succession.

(2) Any of the exclusive rights comprised in a copyright, including any subdivision of any of the rights specified by section 106, may be transferred as provided by clause (1) and owned separately. The owner of any particular exclusive right is entitled, to the extent of that right, to all of the protection and remedies accorded to the copyright owner by this title.

(e) Involuntary Transfer. — When an individual author’s ownership of a copyright, or of any of the exclusive rights under a copyright, has not previously been transferred voluntarily by that individual author, no action by any governmental body or other official or organization purporting to seize, expropriate, transfer, or exercise rights of ownership with respect to the copyright, or any of the exclusive rights under a copyright, shall be given effect under this title, except as provided under title 11. 2

§ 202. Ownership of copyright as distinct from ownership of material object

Ownership of a copyright, or of any of the exclusive rights under a copyright, is distinct from ownership of any material object in which the work is embodied. Transfer of ownership of any material object, including the copy or phonorecord in which the work is first fixed, does not of itself convey any rights in the copyrighted work embodied in the object; nor, in the absence of an agreement, does transfer of ownership of a copyright or of any exclusive rights under a copyright convey property rights in any material object.

§ 203. Termination of transfers and licenses granted by the author 3

(a) Conditions for Termination. — In the case of any work other than a work made for hire, the exclusive or nonexclusive grant of a transfer or license of copyright or of any right under a copyright, executed by the author on or after January 1, 1978, otherwise than by will, is subject to termination under the following conditions:

(1) In the case of a grant executed by one author, termination of the grant may be effected by that author or, if the author is dead, by the person or persons who, under clause (2) of this subsection, own and are entitled to exercise a total of more than one-half of that author’s termination interest. In the case of a grant executed by two or more authors of a joint work, termination of the grant may be effected by a majority of the authors who executed it; if any of such authors is dead, the termination interest of any such author may be exercised as a unit by the person or persons who, under clause (2) of this subsection, own and are entitled to exercise a total of more than one-half of that author’s interest.

(2) Where an author is dead, his or her termination interest is owned, and may be exercised, as follows:

(A) The widow or widower owns the author’s entire termination interest unless there are any surviving children or grandchildren of the author, in which case the widow or widower owns one-half of the author’s interest.

(B) The author’s surviving children, and the surviving children of any dead child of the author, own the author’s entire termination interest unless there is a widow or widower, in which case the ownership of one-half of the author’s interest is divided among them.

(C) The rights of the author’s children and grandchildren are in all cases divided among them and exercised on a per stirpes basis according to the number of such author’s children represented; the share of the children of a dead child in a termination interest can be exercised only by the action of a majority of them.

(D) In the event that the author’s widow or widower, children, and grandchildren are not living, the author’s executor, administrator, personal representative, or trustee shall own the author’s entire termination interest.

(3) Termination of the grant may be effected at any time during a period of five years beginning at the end of thirty-five years from the date of execution of the grant; or, if the grant covers the right of publication of the work, the period begins at the end of thirty-five years from the date of publication of the work under the grant or at the end of forty years from the date of execution of the grant, whichever term ends earlier.

(4) The termination shall be effected by serving an advance notice in writing, signed by the number and proportion of owners of termination interests required under clauses (1) and (2) of this subsection, or by their duly authorized agents, upon the grantee or the grantee’s successor in title.

(A) The notice shall state the effective date of the termination, which shall fall within the five-year period specified by clause (3) of this subsection, and the notice shall be served not less than two or more than ten years before that date. A copy of the notice shall be recorded in the Copyright Office before the effective date of termination, as a condition to its taking effect.

(B) The notice shall comply, in form, content, and manner of service, with requirements that the Register of Copyrights shall prescribe by regulation.

(5) Termination of the grant may be effected notwithstanding any agreement to the contrary, including an agreement to make a will or to make any future grant.

(b) Effect of Termination. — Upon the effective date of termination, all rights under this title that were covered by the terminated grants revert to the author, authors, and other persons owning termination interests under clauses (1) and (2) of subsection (a), including those owners who did not join in signing the notice of termination under clause (4) of subsection (a), but with the following limitations:

(1) A derivative work prepared under authority of the grant before its termination may continue to be utilized under the terms of the grant after its termination, but this privilege does not extend to the preparation after the termination of other derivative works based upon the copyrighted work covered by the terminated grant.

(2) The future rights that will revert upon termination of the grant become vested on the date the notice of termination has been served as provided by clause (4) of subsection (a). The rights vest in the author, authors, and other persons named in, and in the proportionate shares provided by, clauses (1) and (2) of subsection (a).

(3) Subject to the provisions of clause (4) of this subsection, a further grant, or agreement to make a further grant, of any right covered by a terminated grant is valid only if it is signed by the same number and proportion of the owners, in whom the right has vested under clause (2) of this subsection, as are required to terminate the grant under clauses (1) and (2) of subsection (a). Such further grant or agreement is effective with respect to all of the persons in whom the right it covers has vested under clause (2) of this subsection, including those who did not join in signing it. If any person dies after rights under a terminated grant have vested in him or her, that person’s legal representatives, legatees, or heirs at law represent him or her for purposes of this clause.

(4) A further grant, or agreement to make a further grant, of any right covered by a terminated grant is valid only if it is made after the effective date of the termination. As an exception, however, an agreement for such a further grant may be made between the persons provided by clause (3) of this subsection and the original grantee or such grantee’s successor in title, after the notice of termination has been served as provided by clause (4) of subsection (a).

(5) Termination of a grant under this section affects only those rights covered by the grants that arise under this title, and in no way affects rights arising under any other Federal, State, or foreign laws.

(6) Unless and until termination is effected under this section, the grant, if it does not provide otherwise, continues in effect for the term of copyright provided by this title.

§ 204. Execution of transfers of copyright ownership

(a) A transfer of copyright ownership, other than by operation of law, is not valid unless an instrument of conveyance, or a note or memorandum of the transfer, is in writing and signed by the owner of the rights conveyed or such owner’s duly authorized agent.

(b) A certificate of acknowledgment is not required for the validity of a transfer, but is prima facie evidence of the execution of the transfer if —

(1) in the case of a transfer executed in the United States, the certificate is issued by a person authorized to administer oaths within the United States; or

(2) in the case of a transfer executed in a foreign country, the certificate is issued by a diplomatic or consular officer of the United States, or by a person authorized to administer oaths whose authority is proved by a certificate of such an officer.

§ 205. Recordation of transfers and other documents 4

(a) Conditions for Recordation. — Any transfer of copyright ownership or other document pertaining to a copyright may be recorded in the Copyright Office if the document filed for recordation bears the actual signature of the person who executed it, or if it is accompanied by a sworn or official certification that it is a true copy of the original, signed document.

(b) Certificate of Recordation. — The Register of Copyrights shall, upon receipt of a document as provided by subsection (a) and of the fee provided by section 708, record the document and return it with a certificate of recordation.

(c) Recordation as Constructive Notice. — Recordation of a document in the Copyright Office gives all persons constructive notice of the facts stated in the recorded document, but only if —

(1) the document, or material attached to it, specifically identifies the work to which it pertains so that, after the document is indexed by the Register of Copyrights, it would be revealed by a reasonable search under the title or registration number of the work; and

(2) registration has been made for the work.

(d) Priority between Conflicting Transfers. — As between two conflicting transfers, the one executed first prevails if it is recorded, in the manner required to give constructive notice under subsection (c), within one month after its execution in the United States or within two months after its execution outside the United States, or at any time before recordation in such manner of the later transfer. Otherwise the later transfer prevails if recorded first in such manner, and if taken in good faith, for valuable consideration or on the basis of a binding promise to pay royalties, and without notice of the earlier transfer.

(e) Priority between Conflicting Transfer of Ownership and Nonexclusive License. — A nonexclusive license, whether recorded or not, prevails over a conflicting transfer of copyright ownership if the license is evidenced by a written instrument signed by the owner of the rights licensed or such owner’s duly authorized agent, and if

(1) the license was taken before execution of the transfer; or

(2) the license was taken in good faith before recordation of the transfer and without notice of it.

Chapter 2 Endnotes

1 In 1978, section 201(e) was amended by deleting the period at the end and adding “, except as provided under title 11.”

2 Title 11 of the United States Code is entitled “Bankruptcy.”

3 In 1998, the Sonny Bono Copyright Term Extension Act amended section 203 by deleting “by his widow or her widower and his or her grandchildren” from the first sentence in paragraph (2) of subsection (a) and by adding subparagraph (D) to paragraph (2). Pub. L. No. 105-298, 112 Stat. 2827, 2829.

4 The Berne Convention Implementation Act of 1988 amended section 205 by deleting subsection (d) and redesignating subsections (e) and (f) as subsections (d) and (e), respectively. Pub. L. No. 100-568, 102 Stat. 2853, 2857.

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What Is Copyright?

• How It Works

Copyright vs. Trademarks and Patents

The bottom line.

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• Investing Laws

Copyright Definition, Types, and How It Works

Yarilet Perez is an experienced multimedia journalist and fact-checker with a Master of Science in Journalism. She has worked in multiple cities covering breaking news, politics, education, and more. Her expertise is in personal finance and investing, and real estate.

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Copyright refers to the legal right of the owner of intellectual property . In simpler terms, copyright is the right to copy. This means that the original creators of products and anyone they give authorization to are the only ones with the exclusive right to reproduce the work.

Copyright law gives creators of original material the exclusive right to further use and duplicate that material for a given amount of time. Once a copyright expires, the copyrighted item becomes public domain.

Key Takeaways

• Copyright law protects creators of original material from unauthorized duplication or use.
• For an original work to be protected by copyright laws, it has to be in tangible form.
• In the U.S., the work of creators usually is protected by copyright laws until 70 years after their death.
• Other forms of protection for property that cannot be copyrighted include trademarks and patents.

How Copyrighting Works

When someone creates a product that is viewed as original and that required significant mental activity to create, this product becomes an intellectual property that must be protected from unauthorized duplication. Examples of unique creations include:

• Musical lyrics and compositions
• Computer software
• Graphic designs,
• Original architectural designs
• Website content

One safeguard that can be used to legally protect an original creation is copyright. Under copyright law, a work is considered original if the author created it from independent thinking void of duplication. This type of work is known as an Original Work of Authorship (OWA).

Anyone with an original work of authorship automatically has the copyright to that work, preventing anyone else from using or replicating it. The copyright can be registered voluntarily by the original owner if they would like to get an upper hand in the legal system in the event that the need arises.

The copyright to your original work belongs to you even if you don't register it with the government. However, you will need a registered copyright if you are bringing legal action for infringement.

Not all types of work can be copyrighted. A copyright does not protect ideas, discoveries, concepts, or theories. Brand names , logos, slogans, domain names, and titles also cannot be protected under copyright law. For an original work to be copyrighted, it has to be in tangible form. This means that any speech, discoveries, musical scores, or ideas have to be written down in physical form in order to be protected by copyright.

In the U.S., original owners are protected by copyright laws all of their lives until 70 years after their death. If the original author of the copyrighted material is a corporation, the copyright protection period is 95 years from the date of publication or 120 years, whichever expires first.

U.S. copyright law has experienced a number of amendments and changes that have altered the duration of copyright protection. The "life of the author plus 70 years" protection can be attributed to the 1998 Copyright Term Extension Act, (also known as the Mickey Mouse Protection Act or Sonny Bono Act), which generally increased copyright protections by 20 years.

Copyright protection varies from country to country, and can stand for 50 to 100 years after the individual’s death, depending on the country.

While copyright law is not all-encompassing, other laws, such as patent and trademark laws, may impose additional sanctions. Although copyrights, trademarks, and patents are frequently used interchangeably, they offer different forms of protection for intellectual property.

Trademark laws protect material that is used to distinguish an individual’s or corporation’s work from another entity. These materials include words, phrases, or symbols—such as logos, slogans, and brand names—which copyright laws do not cover. Patents cover inventions for a limited period of time. Patented materials include products such as industrial processes, machines, and chemical positions.

What Is the Difference Between Copyright and Trademark?

A copyright protects a creator's original work from being used or duplicated without their permission. A trademark protects the reputation of a business that is associated with identifying material such as their logo or slogan. Both are ways or protecting intellectual property.

Do I Need to Register a Copyright for My Website?

Copyright exists as a right from the moment of creation. You do not need to register your original work, such as content on your website, in order for it to be your intellectual property. However, registering a copyright provides more legal protection. If you plan to bring a lawsuit against someone for infringing on your work, you will need to have a registered copyright.

How Much Does It Cost to Register a U.S. Copyright?

The cost of registering a copyright varies depending on what you are copyrighting and whether you are filing online or by paper. In the United States, the cost of copyright registration ranges from $45 to $500.

Copyright law is designed to protect the creators of original material. Their copyrighted work cannot be used or duplicated without their permission. In the United States, copyright usually lasts for 70 years after the creator's death.

For work to be protected under copyright law, it must be tangible as well as original. Other forms of legal protection for intellectual property also exist, such as trademarks and patents.

U.S. Copyright Office. " Copyright Authorship: What Can Be Registered ."

U.S. Copyright Office. " What Does Copyright Protect? "

U.S. Copyright Office. " How Long Does Copyright Protection Last? "

U.S. Copyright Office. " Duration of Copyright ," Page 1.

Yeshiva University, Cardozo Law School. " Disney's Influence on U.S. Copyright Law ."

U.S. Congress. " S.505 - Sonny Bono Copyright Term Extension Act ."

U.S. Copyright Office. " Duration of Copyright ."

United States Patent and Trademark Office (USPTO). " Trademark, Patent, or Copyright ."

U.S. Copyright Office. " Copyright in General ."

U.S. Copyright Office. " Fees ."

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Copyright Explained

Copyright is another one of the asset types in the intellectual property family that is important for the owner to identify and protect. The following brief introductions were excerpted from the US Copyright Office .

What Is Copyright?

Copyright is a form of protection provided by the laws of the United States (title 17, U. S. Code) to the authors of “original works of authorship”, including literary, dramatic, musical, artistic, and certain other intellectual works.

Who Can Claim Copyright?

Copyright protection subsists from the time the work is created in fixed form. The copyright in the work of authorship immediately becomes the property of the author who created the work. Only the author or those deriving their rights through the author can rightfully claim copyright.

Copyrightable Works

Copyrightable works include the following categories:

• literary works
• musical works, including any accompanying words
• dramatic works, including any accompanying music
• pantomimes and choreographic works
• pictorial, graphic, and sculptural works
• motion pictures and other audiovisual works
• sound recordings
• architectural works

These categories should be viewed broadly. For example, computer programs and most “compilations” may be registered as “literary works”; maps and architectural plans may be registered as “pictorial, graphic, and sculptural works.”

Copyright Notice

To show a copyright notice the following elements are needed:

• The symbol © (the letter C in a circle), or the word “Copyright,” or the abbreviation “Copr.”; and
• The year of first publication of the work. In the case of compilations or derivative works incorporating previously published material, the year date of first publication of the compilation or derivative work is sufficient. The year date may be omitted where a pictorial, graphic, or sculptural work, with accompanying textual matter, if any, is reproduced in or on greeting cards, postcards, stationery, jewelry, dolls, toys, or any useful article; and
• The name of the owner of copyright in the work, or an abbreviation by which the name can be recognized, or a generally known alternative designation of the owner.

Example: © 2008 John Doe or : © 2009 Rochester Institute of Technology

More Information

For more information please visit the US Copyright Office for :  

• Copyright Basics  
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• Taking the Mystery out of Copyright

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What Is Copyright?

A copyright is a collection of rights that automatically vest to someone who creates an original work of authorship like a literary work, song, movie or software. These rights include the right to reproduce the work, to prepare derivative works, to distribute copies, and to perform and display the work publicly.

To understand how these rights can be used or licensed, it’s helpful to analogize them to a bundle of sticks, where each stick represents a one of these rights. The copyright owner has the right to keep each “stick” for themselves, to transfer them individually to one or more people, or to transfer them collectively to one or more people. In short, copyright allows the owner to choose the ways his/her copyrighted works are made available to the public.

The basis for copyright protection stems directly from the U.S. Constitution. The Framers believed that securing the exclusive rights of authors to their writings for limited periods would “promote the progress of science and useful arts.”

The primary objective of copyright is to induce and reward authors, through the provision of property rights, to create new works and to make those works available to the public to enjoy. The theory is that, by granting certain exclusive rights to creators, which allow them to protect their creative works against theft, they receive the benefit of economic rewards and the public receives the benefit of the creative works that might not otherwise be created or disseminated.

While copyright law is intended to serve the purpose of enriching the general public through access to creative works, it’s important to understand that it imposes no obligation upon creators to make their copyrighted works available.

There are, of course, some limitations on the rights granted to copyright owners. Under certain circumstances, anyone can use a work without getting the copyright owner’s permission or paying the copyright owner to use it. Fair use is a good example of that, and you can find more information about fair use here .

There are three basic requirements that a work must meet to be protected by copyright. The work must be:

• Original: To be original, a work must merely be independently created. In other words, it cannot be copied from another. There is no requirement that the work be novel (as in patent law), unique, imaginative or inventive. A work need only demonstrate a very small amount of creativity in order to meet the originality requirement. Very few creations fail to satisfy the minimum creativity requirement.
• A Work of Authorship: To qualify as a work of authorship for the purposes of copyright protection, a work must be a product of creative expression that falls under a category of copyrightable subject matter. Copyrightable subject matter includes a wide range of works, including literary works, musical works, motion pictures and other audiovisual works, derivative works, compilations, and many others.
• Fixed: To meet the fixation requirement a work must be fixed in a tangible medium of expression. Protection attaches automatically to an eligible work the moment the work is fixed. A work is considered to be fixed so long as it is sufficiently permanent or stable to permit it to be perceived, reproduced, or otherwise communicated for a period of more than transitory duration.

These three requirements do not present difficult obstacles regarding copyright protection. In fact, unlike the requirements for protection under patent or trademark law, very few works that fall within the subject matter of copyright fail to satisfy all three of these requirements. And there is no requirement that a copyright owner register his/her work with the U.S. Copyright Office , or place a copyright notice on the work, to obtain copyright protection. However, there are numerous benefits associated with registering one’s work, and more information can be found here .

Generally, a copyrighted work is protected for the length of the author’s life plus another seventy years. In the case of joint works, copyright protection is granted for the length of the life of the last surviving joint creator plus another 70 years. Works made for hire, as well as anonymous and pseudonymous works, are protected for a term of either 95 years from the year of first publication or 120 years from the year of creation, whichever is shorter. When the term of protection for a copyrighted work expires, the work enters into the public domain.

Related Resources

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Arik Gilbert arrest, explained: Nebraska tight end, Georgia transfer charged with burglary

• Arik Gilbert was arrested without incident early Tuesday
• Gilbert, who transferred from Georgia in January, is awaiting word on eligibility in 2023

Nebraska tight end Arik Gilbert, a former five-star recruit who played at both LSU and Georgia, was arrested early Tuesday on suspicion of committing burglary of a Lincoln, Nebraska vape shop, according to multiple reports.

Arrest records for Lancaster County in Nebraska show Gilbert was booked Tuesday, but does not provide any further details as to his arrest. However, multiple reports indicate he was apprehended by local police with several items from the shop, including upward of $1,600 in paraphernalia from the shop; reports also indicate he has been charged with burglary, a felony.

Here's everything you need to know about Gilbert's arrest and what's next for the former top-end high school recruit.

Why was Arik Gilbert arrested?

According to a report from The Athletic , Gilbert was apprehended by officers from the Lincoln (Nebraska) Police Department shortly after 2 a.m. local time on Tuesday. He was found carrying a bag with $1,678 of paraphernalia, allegedly taken from SJ’s Liquor and Vape Shop in Lincoln.

REQUIRED READING: LSU tight end Arik Gilbert enters transfer portal; Chasen Hines, Neil Farrell Jr. will stay

His booking record in Lancaster County does not provide further details on his arrest, but mentions the burglary charge. It also does not indicate any bond amount or fines.

Gilbert transferred to Nebraska in January following two years at Georgia. He applied for an NCAA hardship waiver that has yet to be determined, a source of frustration for the tight end as the 2023 season approaches. If it is not approved, he will have to sit out the 2023 college football season.

It's uncertain what effect, if any, Gilbert's arrest will have on his application.

What is Arik Gilbert charged with?

Gilbert was charged with a single count of burglary, a felony charge in Nebraska. According to the Nebraska legislature , a person commits burglary — a Class IIA felony — if they "willfully, maliciously, and forcibly break and enters any real estate or any improvements erected thereon with intent to commit any felony or with intent to steal property of any value."

There is no minimum punishment for a Class IIA felony in the state of Nebraska, though conviction carries a maximum 20-year sentence in the state penitentiary.

Arik Gilbert 247 recruit rankings

Gilbert was one of the most heralded players of his recruiting class, where the Marietta, Georgia native was listed as the No. 5 player nationally according to 247Sports' Composite rankings . He was also the No. 1 tight end in the nation and the No. 1 player in the state of Georgia. He ultimately committed to play for LSU out of high school.

SEC PREVIEW: Fact or fiction: Georgia football will roll? Jalen Milroe to start? An SEC coach will be fired?

Arik Gilbert stats

Gilbert's best statistical season came as a freshman at LSU in 2020, where he played and started eight games for former coach Ed Orgeron. He caught 35 passes for 368 yards and two touchdowns, including 24 of which that went either for a first down or touchdown. He later transferred to Georgia.

Gilbert played sparingly for the Bulldogs during their run at consecutive championship in 2021-22. His former player bio lists him as having caught only two passes for 14 yards (including a 4-yard touchdown catch) vs. Vanderbilt in 2022.

What is a deal sheet? Transfer deal rules and details explained ahead of deadline day

A deal sheet is a crucial piece of paperwork required for all transfers, but is particularly useful on deadline day for Arsenal, Chelsea and Tottenham.

• 13:24, 28 AUG 2023

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Another record transfer window in England is upon us and Premier League clubs are expected to surpass the £2billion mark this year.

There's five days left of the summer window and more deals are expected to be completed before 11pm on Friday, September 1 . However, sometimes deals don't go to plan as you'd expect and certain transfers have fallen through in the past.

At this point, the deal sheet is crucial as the key piece of paperwork which can be submitted up until 11pm. As long as a 'deal sheet' is sent in to the relevant governing bodies before the deadline, deals can still go through after the cut-off.

So what exactly is a 'deal sheet'? The form is a simple document that is required to be filled out to confirm negotiations have been completed between the two parties.

This allows clubs to be granted 'extra time' to get the deal done - but this can only be submitted between 9-11pm. Should a deal sheet be submitted in this two-hour period, all the documentation must be fully completed in order for it to be allowed.

This gives clubs an extra two hours to get a deal done and is a system which allows for snags in a process which can have multiple stakeholders and millions of pounds changing hands.

READ MORE: Chelsea tipped to complete six transfers with Lautaro Martinez boost and Victor Osimhen chance

It's a different situation for international transfers. If a Premier League club completes a transfer from overseas, they would need to comply with the FIFA Transfer Match System deadline of midnight.

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Explained: Why Folarin Balogun price tag is higher for Chelsea & Spurs than it is for transfer rivals in race for Arsenal’s USMNT striker

Chelsea and Tottenham will reportedly have to pay more for Folarin Balogun than transfer rivals, with Arsenal setting different asking prices.

Article continues below

• American striker is a wanted man
• Linked with clubs across Europe
• Any deal will not come cheap

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https://www.barrons.com/articles/amc-stock-ape-conversion-16222866

AMC Stock: Behind the Memes, APEs, Conversions, and Splits

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AMC’s APE shares will be converted into common stock on Friday.

AMC Entertainment Holdings is a movie-theater chain, but not like any other. The recent buzz around the stock and its so-called APE shares seems to be getting more attention than any films shown in the last few years.

Meme stock AMC (ticker: AMC) concluded a reverse 1-for-10 stock split on Thursday, and its preferred equity units will convert to common stock on Friday. But what does this all mean and why has the stock tumbled in the days leading up to the big moves?

How We Got Here

AMC has garnered a lot of attention since the pandemic hit U.S. shores. The movie-theater company had to shut down operations due to Covid-19 lockdowns after already taking on loads of debt to buy smaller movie chains and invest in upgrading its theaters. The road to survival was not an easy one, and the company had to sell stock to keep the lights on.

Luckily for AMC, it became a “meme stock,” or a stock that gets a massive amount of attention from retail traders who discuss their stock picks on social media threads and try to stick it to short sellers. With such a high short interest at the time, meme traders bought up shares, squeezing institutional investors who wanted to gain from the stock’s potential decline.

• Stock Gets an Upgrade

The stock got as high as $33.90 in June 2021, and AMC wanted to continue selling stock in order to raise more capital. But not all shareholders were on board and AMC didn’t have the votes, so the potential additional sales of AMC stock were squashed .

AMC needed a solution to gain more cash to pay off its debt while keeping investors happy. That’s where the APEs came in.

Explaining the APEs and the Conversion

AMC issued about 517 million preferred equity units, or APEs, to be traded on the New York Stock Exchange in August 2022 with the intention of raising more money to pay off debt. In order to keep legacy AMC holders content, each shareholder gained one share of preferred equity units for each AMC share they owned.

After a year, the APE shares were set to convert into AMC stock, and that conversion was approved by shareholders in March, but it was held up by a case in Delaware Chancery Court .

For an explanation, we turned to Tom Bruni, senior writer at StockTwits, a social-media platform designed for sharing ideas between investors.

“All it does is change the one share of APE unit into a share of AMC, so you’re just eliminating the APE units entirely, and if you own one share of an APE unit, you’ll get one share of AMC stock,” Bruni said.

“Where it gets confusing is they’re doing this reverse split on AMC shares first. So technically, since the conversion is happening second, for every one share of APE unit you have, that converts to 1/10 of one share of AMC shares,” Bruni added.

The reverse stock split took place on Thursday, and is meant to reduce the number of AMC shares outstanding, which will allow the company to issue more shares down the line. What’s important for investors to know is what happens to their stock on Friday. Essentially, if a trader owns 100 APE units, on Friday, that trader will have 10 AMC shares.

The Reason AMC Stock Is Trading Lower

AMC has made it clear that to continue running, it needs to earn more capital. AMC declined to provide a comment for this article, but in a letter to shareholders posted to X , formerly known as Twitter, Chief Executive Adam Aron said that by converting the APE shares to common shares, he believes “AMC will be able to raise equity capital more efficiently and on better terms in the future.”

However, AMC shares were falling 28% Thursday to $14.20 following the reverse stock split.

The stock’s recent tumbles likely reflect the dilution of their current shares in the conversion and the possibility that they will be diluted down the line as AMC will be able to introduce and issue more of its common stock.

What’s Next for AMC

“It’s a double-edged sword because in the short term, you’re diluting shareholders and you’re opening up the door for further dilution in the future because they can issue more shares,” Bruni says. “It’s painful because you’re being diluted, there’s probably going to be losses in the short-term, your investment is not looking so good. But from a longer term business perspective, the underlying business needs this money in order to survive and try to turn itself around.”

AMC is more than just a meme stock: it’s a movie-theater company that needs to sell tickets and concessions to survive. Looking ahead, shareholders are going to want to see signs that the company is filling seats and selling snacks. That won’t be easy, according to Wedbush analyst Alicia Reese.

“AMC still faces uncertainty given the ongoing SAG-AFTRA and WGA strikes. If they go on for months longer, then AMC and other theaters could face sizable release slate holes next year, limiting their revenue and earnings potential in 2024,” Reese wrote in an Aug. 14 research note. “That said, this should be a short-term issue for them overall, and we would expect trends to remain favorable over the long term.”

Reese then upgraded her rating of AMC to Neutral from Underperform and increased her price target to $19 to reflect the reverse stock split. In a research note on Thursday, Reese said that AMC is “best-positioned to gain market share in Q3:23 as it has the largest footprint of IMAX theater in North America, and IMAX significantly over-indexed on Oppenheimer, while Barbie likely played very strongly on AMC’s large footprint of Dolby screens.”

Write to Angela Palumbo at [email protected]

AMC Entertainment Holdings is a movie-theater chain, but not like any other.

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