AMC Entertainment’s plan to raise capital by converting AMC Preferred Equity (APE) units into common stock was hindered when Delaware’s Court of Chancery denied the proposed settlement that would have enabled the company to proceed with the plan. According to the court filing, no reason was given to “lift the status quo order” necessary to complete the conversion.
The movie theater chain issued APEs in March 2022 as a way to pay off its debt load of $5.4 billion and fund its long-term prospects. AMC shareholder were eligible to receive one APE share for each common AMC share they owned. As the creation of APEs was not warmly welcomed by investors and the preferred shares were trading at a significant discount compared to the common AMC share price, the company hoped to turn the stock conversion into money to reduce its debt.
Under the settlement it was proposed that a 10-to-1 stock split and the ability to sell more shares in the exchange. However despite agreeing to the settlement terms, Delaware Chancery Court proceeded to deny the proposed action.
The court decision comes at a moment when AMC’s common shares saw an increase of 10% in premarket trading Thursday, while the preferred APE stock dropped 12% ahead of the market open. Analysts estimated that the proposed stock conversion could have provided the company with collected equity funding of up to $16 billion.
What does the future hold for AMC? The court decision has complicated the theater chain’s plan but it can try to appeal the retention of the status quo order to resume the plan. It is uncertain whether AMC will take this action, but investors are urged to keep an eye on its progress.
Lincoln James
- 2023-04-06
AMC Entertainment's Stock Conversion Plan Denied
AMC Entertainment’s plan to raise capital by converting AMC Preferred Equity (APE) units into common stock was denied by Delaware’s Court of Chancery. Analysts estimated that the proposed stock conversion could have provided the company with collected equity funding of up to $16 billion.
