AMC Theatres Settles Shareholder Lawsuit Over Reverse Stock Split

(RTTNews) - AMC Entertainment Holdings Inc. has reached a settlement in a shareholder lawsuit to proceed with converting its preferred stock into common shares. Following the settlement, which will provide investors additional shares as part of recapitalization, the movie theater chain's shares fell 22 percent in the extended trade on Monday, while its preferred shares grew 22 percent.

In Tuesday's pre-market activity on the NYSE, AMC sharers were losing around 25 percent, while APE shares were gaining around 23 percent.

The settlement was announced by lawyers representing the stockholder group. It will grant holders of AMC common stock one share of common stock for every 7.5 shares held following a reverse stock split carried out in connection with a planned conversion of preferred share units, called APEs, into common stock. Any fractional shares owed will be paid in cash.

The settlement consideration comprises around 6.9 million post-reverse split shares, which will be distributed to pre-conversion holders of AMC common stock. Their aggregate value is expected to exceed $100 million based on recent trading prices of AMC equity.

It is also expected that the latest agreement would allow AMC to proceed with its recapitalization, aimed to provide the company additional flexibility in paying down its debt, providing an important runway for the chain to manage its financial obligations in the long and short term.

It was noted that the planned amendments to the company's charter would have dramatically increased the number of authorized common shares and diluted existing common stockholders, without giving them any compensation in return.

Meanwhile, certain stockholders sought a restraining order to block the amendments and filed suit in the Delaware Court of Chancery on February 20 against AMC and its board of directors.

A hearing on the preliminary injunction had been scheduled for April 27. Without the case and settlement, those amendments would have gone through without any additional consideration to common stockholders.

The parties expect the share distribution to be made around 10 trading days after the company files for stock exchange approval of the conversion and reverse split, which is expected to occur on Tuesday.

Lawyers from the representing law firms said, "The settlement provides investors with additional shares in satisfaction of their voting rights claims, while allowing the company to move forward with its plan to pay down its debt. Common stockholders will have a greater stake in AMC as it continues on its path to recovery."

The case is titled In re AMC Entertainment Holdings, Inc. Stockholder Litigation, C.A. No. 2023-0215-MTZ.

In the after hours trading on Monday, AMC shares well 22.1 percent to trade at $3.98, while its APE shares gained 22.3 percent to $1.81.

In pre-market activity on the NYSE, AMC sharers were trading at $3.84, while APE shares were trading at $1.83.