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Shares of AMC Entertainment Holdings Inc (NYSE:AMC) are trading sharply lower during Friday's after-hours session while sister stock AMC Entertainment Hldg Pref Equity Units (NYSE:APE) is trading higher after a crucial court ruling for the movie theater chain.
Here's what investors need to know.
In a win for AMC, the company gained court approval on Friday for its revised stock conversion plan. The move follows a sustained legal battle against a shareholder lawsuit and challenges to the company’s new financing initiatives.
The settlement includes extra shares for individual investors — who played a pivotal role in the pandemic-era meme stock rally, pulling AMC back from the brink of bankruptcy — due to the stock conversion.
The value of the settlement could range up to $120 million, Bloomberg Law reported, contingent on AMC’s stock price.
The timeline for the APE conversion is uncertain, although AMC representatives said they'd like to raise new financing this month, the report said.
Initiated by a pension fund and other stakeholders, the case focused on the strategy allowing APE holders, a considerable portion of whom were arbitragers speculating on stock conversion, to have a say on AMC’s recapitalization measures.
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Hedge fund Antara Capital LP is a significant holder, possessing about 30% of the APEs. More than 2,800 shareholders rallied against providing APE investors with a voting right.
AMC introduced APEs last year to navigate a share limit the company could not exceed without backing from retail investors. Through the settlement, AMC aimed to placate their reservations by offering an additional class A share for every 7.5 possessed, pegging the settlement’s worth between $110 million to $120 million.
Retail trader Rose Izzo, a leading opponent of the deal, made concerted efforts to thwart it. According to her legal counsel, many feel betrayed by AMC and its leadership, Bloomberg's report said.
AMC CEO Adam Aron underscored the necessity of both its approval and the conversion of APEs to usher in new equity capital for the company.
Despite the win, AMC’s legal journey is far from over. The company is battling its insurers in court over the refusal to back the settlement, while another common stockholder seeks to force the company’s first annual meeting and board election in more than a year, Bloomberg reported.
AMC, APE Price action: Shares of AMC are trading 24.14% lower to $3.99, while APE shares are trading 26.97% higher to $2.26, according to Benzinga Pro.
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