AMC Entertainment Holdings
has filed a revised stock conversion proposal after a judge blocked the company’s plan to convert its so-called APE shares into common stock, CEO Adam Aron said Sunday.
The ruling had a big impact on the stocks in a busy weekend for the movie theatre group that screened the debut of the Barbie and Oppenheimer films.
AMC
stock (ticker: AMC) was up 72% in the Monday premarket having surged 63% in after-hours trading Friday to $7.17, while APE (APE) shares, or AMC Preferred Equity, fell 15% to $1.53.
But with AMC quickly filing a modification of the settlement plan, after it was rejected by Delaware Vice Chancellor Morgan Zurn Friday, the volatility surrounding the stocks could well be here to stay.
The conversion would have allowed AMC to raise more capital by selling stock. CEO Adam Aron told investors that raising fresh equity in the near term “is critical” to the company and that AMC was working to address the court’s concerns.
“AMC must be in a position to raise equity capital. I repeat, to protect AMC’s shareholder value over the long term we MUST be able to raise equity capital. That is especially the case now with the added uncertainty caused by the writers and actors strikes, which could delay the release of movies currently scheduled for 2024 and 2025,” Aron wrote.
AMC reached a settlement with a group of shareholders, who argued the stock conversion diluted existing common stockholders without any compensation in return. The terms of the settlement meant common stockholders would receive shares valued at more than $100 million, lawyers for the plaintiffs said.
But Judge Zurn said she couldn’t approve the settlement because the deal came at the expense of APE unit holders.
“Awarding more shares to common stockholders necessarily comes at the expense of preferred units; the settlement consideration harms preferred unitholders,” she wrote, according to The Wall Street Journal.
Write to Callum Keown at [email protected]
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