AMC gets green light for APE stock conversion, stocks plunge

Key Points

  • AMC the shares sink after a judge approves his plan to convert AMC Preferred Equity (APE) stock into common stock.
  • The AMC settlement gives investors additional shares of the company.
  • AMC said it will stage a 1-for-10 reverse stock split and convert the APE stock later this month.

Shares of AMC Entertainment Holdings (AMC) plunged after a Delaware judge reversed his earlier ruling and approved the cinema chain's plan to convert AMC Preferred Equity shares (APE) into ordinary shares. The decision ends a shareholder lawsuit and paves the way for the company to raise much-needed capital. 

Chancery Court Judge Morgan Zurn agreed in an opinion on Friday that the terms of the settlement between the company and the plaintiffs were fair because investors would receive additional ordinary shares “to offset the dilutive effects” of the APE shares. Last month, Judge Zurn said the original plan waived too many potential claims against the company. The deal provides for shareholders to get 1 share for every 7.5 they own.

What- what does this mean for AMC and APE shareholders?

AMC said after the decision it will begin a 1-for-10 reverse stock split on August 24. It would be the last day of trading in its APE shares, which would convert to common stock the next day.

The company said that 39;Following these steps, it will make a litigation settlement payment to all shareholders based on the court settlement.

AMC launched the APE action in August 2022, as the company grappled with mounting debt and faced bankruptcy after pandemic restrictions caused movie theater attendance to plummet. 

AMC Entertainment lost a third of their value on Monday, falling to their lowest level since January 2021, just ahead of the meme stock craze that sent the stock soaring. The company's APE shares also surged.

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