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AMCEntertainment A big step forward on several key fronts, announcing a settlement in shareholder lawsuits that allows it to issue stock, raise capital, convert its APE unit And go ahead with a 10-for-1 reverse stock split — basically a lifeline if need be.
Shareholders approved the much-needed measure at a special meeting last month But before that, some of them sued the company in Delaware Chancery Court to block the move.
But the big exhibitor said in a filing with the Securities and Exchange Commission on Monday that it had reached a binding settlement that would drop the lawsuit in exchange for about 6.9 million shares, representing the company’s Pro forma 4.4% of common stock outstanding.
The court must approve the settlement.
Shares of AMC fell, and the price of AMC preferred stock rose on the news.
AMC shareholders specifically voted on two proposals in March: one calling for an increase in authorized common shares from 524 million to 550 million shares, and the second calling for a 10-for-1 reverse stock split. If both pass, holders can convert their APEs into common stock.
AMC was on the brink of bankruptcy during Covid, but was rescued by its shift to a meme stock status among retail investors and a recent improvement in the box office.But the company’s debt is a drag CEO Adam Allen warns shareholders on last earnings call In February, it wasn’t out of the woods. A year ago, the company tried unsuccessfully to reach a shareholder agreement for the issuance of new shares, which the company could then sell to raise cash, but it is running low. (Issuing new shares dilutes the positions of current holders.) Last year, Aron found a way out when he created an entirely new class of securities called AMC Preferred Stock, or APE for short. He sold some of them, but not enough or fast enough to have an impact on AMC’s cash pool before APE prices crashed.
His plan is to terminate APE by converting it to common stock combined with a reverse stock split. That boosted the stock’s price. In this case, every 10 shares on hand will be converted into one share, initially worth 10 times its original value.
A judge in the Chancery Court has set a hearing date for April 7 to rule on a preliminary injunction on the measures. The plaintiffs’ case appears to have weakened after a large majority of shareholders approved an amendment to the exhibitor’s certificate of incorporation to increase the share mandate for common stock to 550 million shares and support a reverse stock split. But you never know.
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