All eyes are on AMC Entertainment (NYSE:AMC) today. The company has announced that it will hold its special meeting of stockholders on March 14. At the meeting, shareholders will vote on three proposals that will have a significant effect on AMC stock and AMC Preferred Equity Units (NYSE:APE).
Proposal No. 1, or the Share Increase Proposal, seeks to increase AMC authorized common stock to 550 million shares from 524.17 million shares. To understand this proposal better, we’ll have to dive into a purchase agreement with Antara Capital.
On Dec. 22, Antara agreed to purchase 106.59 million APE units for $75.1 million, while AMC agreed to buy back from Antara $100 million in principal amount of second lien notes due in 2026 in exchange for 91.02 million APE units. Antara purchased 60 million APE units worth $34.9 million “Immediately prior to entry into the Purchase Agreement.”
However, in order for the purchase agreement to fulfill, AMC must seek shareholder approval to increase authorized common stock, which would result in all outstanding APE units to be converted into common stock. As of today, Antara is still on the hook to purchase 46.59 million APE units.
Dear AMC Stock Fans, Mark Your Calendars for March 14
Proposal No. 2, or the Reverse Split Proposal, seeks to gain approval for a reverse stock split in a ratio of 1-for-10. Along with Proposal No. 1, Proposal No. 2 will allow AMC to convert all outstanding shares of Series A preferred stock into common stock. Each unit of APE represents a 1/100 interest in Series A preferred stock. Each Series A preferred stock is convertible into 100 shares of AMC stock.
Proposals No. 1 and No. 2 are “cross-conditioned on the approval of the other.” Essentially, shareholder approval of both proposals is required for them to be enacted. AMC explains:
“The Share Increase Proposal alone will not create sufficient authorized Common Stock, without the Reverse Split Proposal, to enable the conversion to occur. Nor will the Reverse Split Proposal alone satisfy the terms of the Series A Preferred Stock to enable the conversion to occur.”
Finally, Proposal No. 3 seeks to adjourn the special meeting to a later date if there are not enough votes for the approval of Proposal No. 1 and Proposal No. 2.
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On the date of publication, Eddie Pan did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.