All eyes are on AMC Entertainment (NYSE:AMC), as the movie-theater chain will hold its special meeting of stockholders tomorrow to decide on the conversion of AMC Preferred Equity Units (NYSE:APE) into AMC shares. A 1-for-10 reverse stock split is also up for a vote.
Meanwhile, the company filed for a resale of up to 232.43 million shares of APE, equivalent to a 24.78% ownership stake, exclusively for Antara Capital. As of March 8, that was the total amount of APE held by Antara and its subsidiaries.
To better understand the resale, let’s take a look into Antara’s forward purchase agreement (FPA) established with AMC last December. Let’s get into the details.
AMC Stock: AMC Files Resale of Up to 232 Million Shares
On Feb. 7, AMC issued 106.59 million APE units to Antara for a purchase price of $75.1 million and also purchased from the firm $100 million of AMC second lien notes due in 2026. In return, Antara agreed to purchase 91.03 million APE units. Before the FPA, Antara disclosed that it had purchased 60 million APE units worth $34.9 million through AMC’s at-the-market program.
The FPA also stipulated that AMC must register a resale of APE units. Following the completion of the resale, Antara will own zero units of APE. AMC added that it will not receive any proceeds from the resale, as they will all go towards Antara.
The resale invokes an image of the two parties entering into a financing deal with mutually beneficial conditions. AMC would benefit by buying back notes and receiving capital, while Antara would receive APE units that it could turn around and sell.
AMC to Hold Special Meeting Tomorrow
Along with a 1-for-10 reverse stock split, the company will also reveal a proposal to increase authorized AMC shares to 550 million from 524.17 million. AMC noted that both the reverse split and increase in authorized share proposals must be approved in order to convert APE into AMC. If either proposal is voted against, then the conversion cannot take place.
The conversion has attracted shareholder backlash, which has resulted in two putative stockholder class action complaints. On Feb. 27, the Delaware Court of Chancery enforced a status quo order that would stop the proposals from being implemented “pending a ruling by the court on the plaintiffs’ to be-filed preliminary injunction motion.”
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.