AMC shares surge after judge blocks stock conversion plan
AMC faced a lawsuit filed in February over a rigged shareholder vote
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AMC shares soared on Monday after a judge on Friday blocked a proposed settlement on its stock conversion plan that would have allowed the company to issue more shares, sending its preferred shares, APE, down and promoting a warning from CEO Adam Aaron.
Delaware Vice Chancellor Morgan Zurn said in the ruling that she cannot approve the settlement "as submitted," because it would release potential claims by preferred shareholders who were not represented in the lawsuit or settlement.
| Ticker | Security | Last | Change | Change % |
|---|---|---|---|---|
| APE | NO DATA AVAILABLE | - | - | - |
| AMC | AMC ENTERTAINMENT | 4.98 | +0.18 | +3.77% |
AMC THEATRES SCRAPS SEAT LOCATION-BASED PRICING PLAN
HARWOOD HEIGHTS, ILLINOIS - DECEMBER 04: An AMC Theatres logo hangs on the front of one of the company's movie theaters shuttered by the coronavirus COVID-19 on December 04, 2020 in Harwood Heights, Illinois. In what could be another blow to the thea ((Photo by Scott Olson/Getty Images) / Getty Images)
Aaron issued an open letter, shares on Twitter, to investors blasting the move.
"Raising fresh equity in the near term is critical to our company, so it is important that we work to address the concern raised in the Delaware Court of Chancery’s ruling on Friday. In leading AMC through this once-in-a-century pandemic and its aftermath, I have been driven by this over-arching goal: Do not let AMC fall into financial ruin, ensure that AMC survives, put AMC on a path to eventually thrive. Along the way, I have done my utmost to be transparent with AMC shareholders, and am doing so again right now" a portion of the letter read.
The company was sued in February for allegedly rigging a shareholder vote that would allow AMC to convert preferred stock to common stock and issue hundreds of millions of new shares.
AMC
.The conversion would dilute the common stockholders' ownership, but allow AMC to pay down some of its $5.1 billion in debt.
AMAZON REPORTEDLY CONSIDERING PURCHASE OF AMC ENTERTAINMENT
Adam Aron, Chairman of the Board and CEO, AMC Entertainment, listens during the Milken Institute Global Conference on October 18, 2021 in Beverly Hills, California. ((Photo by PATRICK T. FALLON/AFP via Getty Images) / Getty Images)
AMC has told investors it is burning cash at an unsustainable rate and warned that an inability to raise capital could force the company into bankruptcy.
It cannot carry out its plan to do so until the litigation has been resolved.
| Ticker | Security | Last | Change | Change % |
|---|---|---|---|---|
| AMC | AMC ENTERTAINMENT | 5.04 | +0.09 | +1.82% |
| APE | NO DATA AVAILABLE | - | - | - |
The settlement received more than 2,800 objections from shareholders, a level of interest Zurn called "unprecedented" in her ruling on Friday.
"AMC's stockholder base is extraordinary," she said, adding that many "care passionately about their stock ownership and the company."
The judge rejected the settlement after determining the holders of common stock could not release AMC from potential claims that belong to holders of preferred shares, an issue which objectors did not raise.
AMC movie theater exterior, Marlton, N.J., Oct. 20, 2021.
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Many objectors sought permission to opt out of the settlement and sue on their own behalf, dismissing AMC's dire financial predictions as "fear tactics."
The case is In re: AMC Entertainment Holdings Inc. Stockholder Litigation, No. 2023-0215, in the Delaware Court of Chancery.
*This story, originally published on 7-21-23 has been updated on 7-24-23.