Shares of AMC Entertainment surged 23% amid reports that a Delaware judge has set a hearing for a preliminary injunction request filed by a group of shareholders accusing the theater chain of eroding their voting power as the company seeks to raise more capital.
On March 14, AMC is scheduled to hold a special shareholders’ meeting to vote on an amendment to the company charter that would convert AMC Preferred Equity units — or APE units — into common shares, increasing the number of common shares from roughly 523 million to 550 million. A lawsuit filed by a group of AMC shareholders argues that the plan is a violation of the company’s fiduciary duties to shareholders in reducing the value of their common shares.
A hearing on the injunction request was scheduled for March 10, four days before the shareholder meeting on the proposed reverse split. Now, Vice Chancellor Morgan Zurn has rescheduled the meeting to April 27. While the company is allowed to move forward with the shareholder vote, it cannot implement the APE unit conversion if it is approved by shareholders until the hearing is held and unless the judge denies the injunction request.
AMC declined to comment for this report.
As movie theaters have fought to get back on their feet after the COVID-19 pandemic — some faring worse than others, as Regal Cinemas owner Cineworld is in the midst of bankruptcy proceedings — AMC’s stock has been on a roller coaster ride after becoming an internet meme stock, spiking as high as $59 in summer 2021.
That meme stock surge completely wore off by the end of last summer, with AMC’s stock price at Monday close standing at $7.63 even after a 23% bump to start the week, but not before AMC used that surge to lighten some of its $5 billion-plus debt load. Its stock conversion plan is one of several plans the multinational chain has to shore up its finances while anticipating continued rebuilding of the box office in 2023.
AMC is set to publish an earnings report for the fourth quarter of 2022 Tuesday afternoon.