AMC Theatres has reached a settlement on a shareholder lawsuit that sought to block a reverse stock split, clearing the way to convert the company’s preferred “APE” shares to common shares in an effort to boost capital.
In an SEC filing published Monday, AMC says that it will issue 6.9 million shares, or 4.4% of the company’s stock, to the plaintiff shareholders in exchange for the lawsuit being dropped. The number of shares was calculated based on a formula of one share of equity issued for every 7.5 shares held by the plaintiffs.
On March 14 in a special shareholder meeting, AMC received approval to convert the AMC Preferred Equity shares, or APE share, into common shares, resulting in those shares seeing a bump in their price while AMC’s stock took a hit, dropping to just over $4 per share.
Through the conversion, the number of common shares in AMC will rise from 526 million to 550 million, diluting the value of current investors’ holdings. It comes as AMC, which saw wild swings in its share price as it became a meme stock in 2021, is still dealing with nearly $6 billion in debt. Wedbush Securites projects that AMC’s revenue will increase as the box office continues to recover but does not foresee the theater chain turning a quarterly profit until 2024.
The news of the settlement has sent AMC’s stock down and the APE price up in after-hours trading, with the AMC shares dropping from $5.11 at the market’s close to $3.79 by later afternoon. APE shares rose from $1.48 at close to $1.80.
