AMC Shares Experience Surge After Court Rejects 'APEs' Stock Conversion Deal

Shares of AMC Entertainment witnessed a remarkable surge of up to 100% following a Delaware judge's decision to reject a $129 million settlement between the cinema chain and its common stockholders. The proposed settlement aimed to allow holders of preferred shares to convert their holdings into common stock in exchange for payment to common stockholders. However, the judge ruled the deal as unfair since it would have blocked any future legal claims against the company from preferred shareholders, without seeking their consent.

AMC, which faced significant losses during the pandemic, utilized its status as a social media "meme stock" to sell more shares aggressively for increasing liquidity. However, it needed stockholder approval to increase the number of authorized shares, which some shareholders opposed due to concerns about dilution.

To raise cash, the company had introduced convertible preferred stock known as APEs, with plans to collapse it into common shares later for a simpler capital structure. Despite attempting to win shareholder approval through a transaction with a hedge fund, Antara Capital, shareholders raised objections claiming the deal violated their rights.

The court's decision to reject the settlement came as a surprise, considering a previous report by a "special master" in favor of the deal. AMC's unique and passionate retail investor base played a significant role in the case, with thousands of shareholders expressing their views on the litigation.

Following the court ruling, AMC's shares experienced a significant surge of over 60% in after-hours trading, marking a noteworthy turn of events for the troubled cinema chain.

This is for informative purposes only and not for sharing or publishing.