AMC Theaters has settled a shareholder suit that threatened a planned reverse stock split as a result of the conversion of AMC Preferred Equity Units, or APEs, into common stock.
AMC Entertainment Holdings, parent company of the mega-exhibitor and led by CEO Adam Aron, said in an SEC filing that it entered into a settlement agreement on April 2 in which holders of AMC common stock will receive one share of equity for every 7,000 shareholders. 5 stocks held after a scheduled 10-for-1 split.
The settlement of the AMC Entertainment Holdings Inc. Stockholder Litigation case in a Delaware Chancellery Court is valued at more than $100 million, based on recent trading prices of AMC stock, according to attorneys representing the shareholder case.
“The settlement provides investors with additional shares in satisfaction of their voting rights claims while the company can move forward with its plan to service its debt. Common stockholders will gain a larger stake in AMC as it continues on its road to recovery,” shareholders jointly represented by law firms Bernstein Litowitz Berger & Grossmann, Grant & Eisenhofer, Fields Kupka & Shukurov and Saxena White said in a statement.
The shareholder lawsuit sought to block a plan by AMC’s board of directors to increase the number of authorized shares without compensating existing common stockholders. On March 14, shareholders voted to allow AMC Theaters’ parent company to convert APE units into common stock of the company.
News of the lawsuit settlement caused shares in AMC Theaters to plunge $1.07, or 21 percent, to $4.04 in after-hours trading, while the value of APE units rose 27 cents, or just over 18 cents. percent, rose to $1.75.
AMC Theaters also got the green light from investors for a reverse stock split to help the mega-exhibitor continue selling stock, rather than APE units, to reduce its high debt burden. The conversion of APE units, as approved by investors, could be delayed with a possible Delaware Chancery Court injunction hearing scheduled for April 27.
The Delaware court allowed the March 14 vote on the conversion of APE preferred units to proceed, but the scheduled court hearing in April could delay any further debt increases by AMC after the shareholder vote.
