AMC Theatres Resolves Shareholder Lawsuit Regarding Reverse Stock Split Proposals.
According to law firms representing stockholders, the settlement payment could be worth more than $100 million based on recent share prices for the mega-exhibitor.
AMC Theatres has reached a settlement with a shareholder lawsuit that arose from the conversion of AMC Preferred Equity Units, or APEs, into common stock and threatened a planned reverse stock split.
AMC Entertainment Holdings, led by CEO Adam Aron, announced in an SEC filing on April 2 that it had entered into a settlement agreement under which holders of AMC common stock would receive one share of equity for every 7.5 shares held following a planned 10-for-1 split.
According to the lawyers representing the shareholders in the AMC Entertainment Holdings Inc. Stockholder Litigation case in a Delaware Chancellery Court, the settlement is worth more than $100 million based on recent trading prices of AMC equity.
“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,” According to a statement issued by law firms Bernstein Litowitz, Grant & Eisenhofer, Fields Kupka & Shukurov, and Saxena White on behalf of stockholders.
AMC's board of directors wanted to increase the number of authorized shares without paying existing common stockholders, and the shareholders' lawsuit aimed to stop that. The conversion of APE units into common shares by the parent company of AMC Theatres was approved by shareholders on March 14.
The news of the lawsuit settlement sent APE units up by nearly 30%.
AMC Theatres also received approval from investors for a reverse stock split, which will allow the company to continue selling stock rather than APE units in order to reduce its debt. With a possible Delaware Chancery Court injunction hearing scheduled for April 27, the conversion of APE units as approved by investors could be delayed.
The Delaware Court has permitted the APE preferred units conversion vote to proceed on March 14. However, the scheduled court hearing in April may cause a delay in any future debt-raising action by AMC after the shareholder vote.
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