© Reuters. FILE PHOTO: An AMC theatre is pictured in Times Square in the Manhattan borough of New York City, New York, U.S., June 2, 2021. REUTERS/Carlo Allegri/File Photo
By Tom Hals
WILMINGTON, Delaware (Reuters) – AMC Entertainment (NYSE:) Inc was hit with a class-action lawsuit on behalf of preferred shareholders that are challenging its stock conversion plan, just days after the cinema operator ended a bruising legal fight with a different group of investors.
AMC got court approval on Friday for a settlement of a class action lawsuit by holders of the company’s common stock, clearing the way for the company to convert its preferred stock, known as APEs, to common shares.
AMC, a “meme” stock that was part of a social media-fueled trading frenzy in 2021 along with other companies such as Gamestop, has said that conversion plan is key to strengthening its finances.
A holder of APEs said in the lawsuit, which was filed late on Monday but hit the public docket on Tuesday, that APEs investors are being shortchanged in the settlement that was approved on Friday.
AMC did not respond to a request for comment.
AMC agreed to settle the class action by holders of common stock by providing them with additional shares worth an estimated $129 million. The holders of common stock had claimed that the company rigged a shareholder vote against them.
In the new lawsuit filed in Delaware’s Court of Chancery, APE investor Michael Simons claims AMC is obligated to provide the same amount of new stock to APE holders as the company is giving to common shareholders in the settlement.
Simons’ complaint said the settlement “has the effect of diluting the preferred shareholders’ ownership interest in AMC.” He also said it violates the certificate of designation that governs AMC’s preferred stock.
The lawsuit adds to months of legal turmoil for the company. Objections to shareholder class action settlements are rare, but AMC received thousands from investors who questioned claims about the company’s dire finances. The settlement was initially rejected by a Court of Chancery judge in July before the judge signed off on a revised deal on Friday.
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