Three weeks ago, Delaware Chancery Court Judge Morgan Zern rejected a proposed settlement between AMC Entertainment Holdings Inc. (NYSE: AMC) and shareholders who had filed suit to stop the agreement. After markets closed Friday, Judge Zurn approved a revised settlement that sent AMC’s common shares plunging and preferred shares (NYSE: APE) soaring.
In her July 21 ruling, Judge Zurn said that the settlement “cannot be approved as submitted” because it “purports to release not only claims associated with the common stock, but also claims associated with preferred interests that common stockholders might also hold.”
The revised settlement eliminated the language that sought to release direct claims of preferred shareholders (Apes) that common shareholders had no power to release. Citing four specific tasks the court must consider, Judge Zurn declined to give the class that sued the company the right to opt out of the settlement, approved the adequacy of AMC’s notice of the settlement to the class, found the settlement to be reasonable, and awarded plaintiff’s lawyers’ 12% of the settlement for fees and expenses. The judge denied “an objector’s” request for a stay made if the revised settlement was approved.
The settlement also provides that shareholders will receive one additional share of common stock for every 7.5 shares they currently own.
Absent further litigation, AMC is now free to convert its APE shares to common stock and enact a 10-for-1 reverse stock split of the common stock, giving the company the ability to issue more shares to raise the money AMC needs to deal with its long-term debt of $4.8 billion and net debt of $9.06 billion. The company reported $435.3 million in cash and equivalents at the end of the June quarter.
AMC common stock traded down 25.5% in after-hours trading Friday, falling from a closing price of $5.26 to $3.92 per share. APE preferred shares closed Friday’s regular session at $1.78 and gained 24.2% to rise to $2.21 in after-hours trading.
Take This Retirement Quiz To Get Matched With A Financial Advisor (Sponsored)
Take the quiz below to get matched with a financial advisor today.
Each advisor has been vetted by SmartAsset and is held to a fiduciary standard to act in your best interests.
Here’s how it works:
1. Answer SmartAsset advisor match quiz
2. Review your pre-screened matches at your leisure. Check out the
advisors’ profiles.
3. Speak with advisors at no cost to you. Have an introductory call on the phone or introduction in person and choose whom to work with in the future
Take the retirement quiz right here.
Thank you for reading! Have some feedback for us?
Contact the 24/7 Wall St. editorial team.
Editors' Picks
