A judge is letting AMC Entertainment’s settlement with certain shareholders go forward, clearing the way for the company to issue more shares and raise capital.
Photo: David Paul Morris/Bloomberg News
A judge on Friday approved
plan to complete a set of moves that would allow the movie-theater chain to issue more common shares and raise capital.
Shares of AMC fell 27% in late-trading Friday to $3.90.
AMC has sought to convert its preferred equity units, known as Apes, to common shares and enact a 10-for-1 reverse stock split. AMC has said it needs to issue more shares to raise money as the company grapples with its debt.
A settlement between AMC and certain shareholders, who sued the company to prevent the conversion on concerns that it would dilute their shares, was blocked last month by Delaware Chancery Court Vice Chancellor
The settlement between AMC and some shareholders was opposed by other retail investors.
In an opinion issued Friday, Zurn allowed the settlement to go forward. The settlement also would provide an extra common share for every 7.5 shares owned.
The settlement agreement between AMC and its shareholders would only slightly prevent the dilution of common shares, increasing the proportion of the company held by existing common shareholders by about 3% in aggregate, Zurn wrote in the opinion. But she argues the settlement is still beneficial to both parties, as it “gives the class more equity in a struggling company, and gives the company a way to raise needed revenue.”
Zurn also awarded the plaintiffs counsel fees worth 12% of the settlement consideration, though the value of the settlement has varied greatly, as it is based on the volatile share price of AMC’s stock. Estimates have been as high as $129 million.
The settlement is the latest update in a long-running effort by AMC to raise cash by selling shares. In 2021, the company sought to issue more common shares, but couldn’t gain sufficient shareholder support for the proposition.
AMC issued its preferred equity units in a special dividend and listed the Apes publicly in August 2021.
The company teetered on the edge of bankruptcy in 2020 and 2021 as attendance at cinemas dried up during the pandemic. While studios have begun cranking out box-office hits again, AMC has faced a slow recovery to profitability, posting its first quarterly profit since 2019 in the second quarter of this year.
Write to Ben Glickman at firstname.lastname@example.org