AMC Entertainment Holdings (NYSE:AMC) shares tumbled 24% last night as it settled a legal case that will result in preferred stockholders being given the option to convert their holdings into shares.
Ordinary shareholders had sued the 'meme' favourite, claiming that by issuing the preferred shares the cinema owner had tried to "eviscerate" their voting power.
As part of the settlement, the plaintiffs will receive one share for every 7.5 shares they hold, which lawyers said is worth more than US$100mln.
After the filing, the value of the preferred shares jumped by 21% with AMC adding it would ask a judge to lift a related holding order to clear the way to complete the stock conversion.
AMC issued the preferred shares to help ease its financial problems, since when they have lost over 70% of their value.
Shareholders voted last month to allow the group to issue more shares and consolidate them on a ten-into-one basis.
AMC was one of the hottest of the "meme stocks" that during the Covid pandemic saw retail investors group together through social media and inflict huge losses on short sellers in both the cinema group and others businesses such as video chain Gamestop.
At the time, the company took advantage of its soaring share price and raised more than US$2bn in new funding but is still struggling to recover from the damage caused by the pandemic.
Earlier this month, there were reports that Amazon is looking at a takeover bid for AMC, but these have not been confirmed.