AMC Entertainment, the cinema operator hit hard by the COVID-19 pandemic, has received approval for its revised stockholder settlement from a Delaware judge. This comes three weeks after the judge rejected a previous deal by the company. The ruling caused a surge in the shares of AMC’s preferred stock, rising by 27%, while the company’s common stock fell by the same percentage.
AMC has been struggling with cash burn and a significant debt burden of $5.1 billion. The approved settlement will allow the company to sell more shares and use the proceeds to pay down its debt. As part of the settlement, AMC will provide stock worth approximately $129 million to holders of its common stock, resolving potential legal claims related to a stock conversion plan.
Unlike the previous settlement, the approved class action settlement does not allow shareholders to opt out and binds them to the agreement. The prior version of the settlement was rejected because it settled potential claims by preferred shareholders who were not represented in the lawsuit. This provision was removed from the revised settlement.
Over 2,800 objections were filed by shareholders against the initial settlement, with many seeking permission to opt out and pursue their own legal actions. However, the judge deemed an opt-out option detrimental to the company and its shareholders. The objections dismissed AMC’s dire financial predictions as “fear tactics.”
AMC was sued in February for allegedly rigging a shareholder vote that would enable the conversion of preferred stock to common stock and the issuance of hundreds of millions of new shares. The investors who filed the lawsuit claimed that AMC devised this plan to bypass the opposition of common stockholders who were against diluting their holdings.
Without the approved settlement, common stockholders and preferred shareholders would have ended up owning 34.28% and 65.72% of AMC, respectively. However, under the revised settlement, common stockholders and preferred shareholders will own 37.15% and 62.85%, respectively.
The case, titled In re: AMC Entertainment Holdings Inc. Stockholder Litigation, No. 2023-0215, was heard in the Delaware Court of Chancery.
How did the approval of AMC Entertainment’s revised stockholder settlement impact the company’s preferred and common stock?
AMC Entertainment, the cinema operator hit hard by the COVID-19 pandemic, has received approval for its revised stockholder settlement from a Delaware judge. This comes three weeks after the judge rejected a previous deal by the company. The ruling caused a surge in the shares of AMC’s preferred stock, rising by 27%, while the company’s common stock fell by the same percentage.
AMC has been struggling with cash burn and a significant debt burden of $5.1 billion. The approved settlement will allow the company to sell more shares and use the proceeds to pay down its debt. As part of the settlement, AMC will provide stock worth approximately $129 million to holders of its common stock, resolving potential legal claims related to a stock conversion plan.
Unlike the previous settlement, the approved class action settlement does not allow shareholders to opt out and binds them to the agreement. The prior version of the settlement was rejected because it settled potential claims by preferred shareholders who were not represented in the lawsuit. This provision was removed from the revised settlement.
Over 2,800 objections were filed by shareholders against the initial settlement, with many seeking permission to opt out and pursue their own legal actions. However, the judge deemed an opt-out option detrimental to the company and its shareholders. The objections dismissed AMC’s dire financial predictions as “fear tactics.”
AMC was sued in February for allegedly rigging a shareholder vote that would enable the conversion of preferred stock to common stock and the issuance of hundreds of millions of new shares. The investors who filed the lawsuit claimed that AMC devised this plan to bypass the opposition of common stockholders who were against diluting their holdings.
Without the approved settlement, common stockholders and preferred shareholders would have ended up owning 34.28% and 65.72% of AMC, respectively. However, under the revised settlement, common stockholders and preferred shareholders will own 37.15% and 62.85%, respectively.
The case, titled In re: AMC Entertainment Holdings Inc. Stockholder Litigation, No. 2023-0215, was heard in the Delaware Court of Chancery.
