AMC Entertainment Holdings (NYSE:AMC) shares surged by more than in third in Monday pre-market trading after a court rejected a deal that would have converted its preferred equity units (APEs) into common stock through the issue of more shares.
Reuters reported that Delaware Vice Chancellor Morgan Zurn said in the ruling that she cannot approve the deal, which would provide AMC common stockholders with shares worth an estimated $129 million, because it would also settle potential claims by preferred shareholders who were not represented in the lawsuit.
The company was sued in February for allegedly rigging the shareholder vote that would have allowed it to convert preferred stock to common stock and issue hundreds of millions of new shares, per the Reuters report.
In a letter to investors on Sunday that was posted on Twitter, CEO Adam Aaron said the company had submitted a revised proposal for its stock conversion plan.
“Raising fresh equity capital in the near term is critical to our company,” Aaron said.
“If we are unable to raise equity capital, the risk materially increases of AMC conceivably running out of cash in 2024 or 2025, or of AMC being unable to satisfactorily refinance and stretch out the maturity of our debt.”
My open letter message below to you all is on a subject of existential importance to AMC Entertainment shareholders. I urge you to read it. Adam Aron #AMCSurviveThenThrive pic.twitter.com/40tyncnr1n
— Adam Aron (@CEOAdam) July 23, 2023
AMC’s shares were up 36% at $5.99 shortly before the market opening.
Contact the author at stephen.gunnion@proactiveinvestors.com