AMC Entertainment Holdings, a prominent movie theatre group, has encountered obstacles in its efforts to convert its APE shares into common stock. Following a recent ruling by a judge blocking the conversion plan, CEO Adam Aron has announced the filing of a revised proposal.
The consequences of this ruling have had a significant impact on the stocks, particularly as AMC debuted the Barbie and Oppenheimer films over the weekend. Shortly after-hours trading on Friday, AMC stock (ticker: AMC) skyrocketed 63% to $7.17. Conversely, APE (APE) shares, representing AMC Preferred Equity, experienced a 15% decline to $1.53.
As AMC promptly submitted a modified settlement plan in response to Vice Chancellor Morgan Zurn’s Friday rejection, the volatility surrounding these stocks may persist in the near future.
The conversion of APE shares into common stock would have allowed AMC to generate additional capital through stock sales. Adam Aron stressed the importance of raising fresh equity in the near term, stating that it is critical to protect long-term shareholder value. He further emphasized the urgency given the uncertainty caused by ongoing writers and actors strikes, which may potentially disrupt the release schedules of films scheduled for 2024 and 2025.
AMC reached a settlement agreement with a group of shareholders who contested the stock conversion on the grounds that it diluted existing common stockholders without providing any compensation in return. The settlement terms stipulated that common stockholders would receive shares valued at over $100 million.
However, Judge Zurn expressed her inability to approve the settlement due to its detrimental impact on APE unit holders. In her written statement reported by The Wall Street Journal, she highlighted that allocating more shares to common stockholders inevitably disadvantages preferred unit holders.
It remains to be seen how AMC will navigate these hurdles and address the court’s concerns regarding equity capital. The outcome of this situation will have significant implications for the future of the company.
To protect shareholder value and ensure long-term success, AMC must secure equity capital.