- Shares of AMC Entertainment (AMC) fell 25% at the start of trading on Tuesday while its preferred shares surged over 30%. The movie-theater operator announced a settlement with shareholders over its proposed stock conversion, allowing it to proceed with the plan to convert AMC Preferred Equity (APE) units into common stock.
- Last August, AMC started trading APE units, offering each shareholder an APE unit for every common share owned. However, these units can't be converted into AMC shares, leading to a significant discount in trading. The company's plan to convert these units into shares of common stock has faced court proceedings, despite being approved by shareholders and including a 10-to-1 reverse stock split and the increase of authorized shares.
Why it matters
Last month, shareholders approved a proposal that included a reverse stock split and an increase in authorized shares, but this was met with legal challenges from a group of shareholders who argued that it diluted their stake. AMC announced a settlement late Monday, which will see common stockholders receive one share for every 7.5 shares held after the reverse stock split. According to lawyers for the plaintiffs, this could amount to over $100 million in value for the common stockholders.
