AMC Entertainment (NYSE:AMC) held its special meeting of stockholders yesterday, which revealed the preliminary approval of a 1-for-10 reverse stock split and an increase in authorized shares to 550 million from 524.17 million. The reverse split and increase in authorized shares would allow for the conversion of AMC Entertainment Preferred Equity Units (NYSE:APE) into AMC stock. Now, the final vote has been disclosed.
Generally, preliminary results reflect the final results. That’s exactly what happened here. Shareholders voted 87% in favor of the reverse split proposal and 88% in favor of the increase in authorized shares. 182.34 million shares of AMC stock cast a vote out of a total of 517.58 million eligible shares. Likewise, 583.29 million shares of APE cast a vote out of a total of 929.84 million eligible shares.
CEO Adam Aron had the following to say about the results:
“If implemented, AMC should have an ability to raise a significant amount of equity capital in the months and years ahead. Winning these shareholder votes by such a lopsided margin is a powerful vote of confidence to allow AMC to raise equity capital, reduce debt, strengthen our balance sheet and continue our transformation.”
AMC Stock: Shareholders Approve All Proposals at Special Meeting
Still, a major roadblock is preventing AMC from enacting these proposals. On Feb. 20, two putative stockholder class actions were filed against AMC, claiming that AMC shareholders should vote on proposals separately from APE shareholders or that APE shareholders should be “enjoined” from the vote according to 8 Del. C. § 242(b).
On Feb. 27, a status quo order was enforced. The order stipulates that the reverse split and increase in authorized shares proposals, along with the conversion of APE into AMC, cannot be enacted until the Delaware Court of Chancery rules on the plaintiff’s preliminary injunction motion. A hearing for the preliminary injunction motion has been scheduled for April 27.
“As previously disclosed, we will vigorously oppose claims made in litigation in the Delaware Court of Chancery that we are not following the wishes of our shareholders designing our share structure and authorizations,” said CEO Adam Aron during yesterday’s meeting.
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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.
