AMC Entertainment Holding Inc.’s stock jumped premarket Thursday after a judge denied the company’s attempt to quickly resolve a shareholder court fight over a proposed conversion of AMC Preferred Equity units into common stock.
Shares of AMC
AMC,
which ended Wednesday’s session up 3.6%, rose 12.6% in premarket trades. The APEs
APE,
which closed up 1.8% Wednesday, tumbled 12.3% before market open.
In a filing Monday, AMC announced a settlement in the legal battle, opening the way for the stock conversion, alongside a 10-to-1 reverse stock split and the capacity to sell more shares. The move is part of the company’s ongoing battle to eliminate debt, but has faced court proceedings.
Related: AMC and APE shares swing as judge denies attempt for a speedier stock conversion and reverse split
Last month, AMC shareholders voted in support of the company’s proposal to convert APE units into shares of common stock in what the company’s CEO Adam Aron described as a “landslide victory.”
Following the settlement, the two sides asked a Delaware Chancery Court judge to lift a status-quo order before deciding to approve the settlement. However, in a letter Wednesday Vice Chancellor Morgan Zurn wrote that “the parties offer no good cause to lift the status quo order.”
“This Court has cautioned against parties performing even partial settlement obligations before a settlement hearing, as doing so prevents the Court from meeting its obligation to oversee class action settlements,” Zurn added, in the letter.
AMC describes itself as the largest movie-theater company in the world, with approximately 950 theaters and 10,500 screens across the globe.
In a note released Tuesday B. Riley Securities analyst Eric Wold said that the settlement clears the decks for a “potentially massive” equity raise that could generate as much as $16 billion. “Should the conversion of APE units to AMC common shares be permitted to proceed — along with the increase in authorized common shares and 1-for-10 reverse stock split — we continue to see a positive path for the company to raise significant amounts of capital.”
Over the past two years, AMC has been on a roller-coaster ride that took it from beleaguered pandemic victim to meme-stock phenomenon. AMC’s stock is down 0.5% in 2023, outpacing the S&P 500 index’s
SPX,
6.5% gain, while the APEs have risen 21.3%.
This post was originally published on Market Watch
