Shares of AMC Entertainment Preferred Equity Units (NYSE:APE) opened higher by about 8% ahead of the AMC Entertainment (NYSE:AMC) special meeting of stockholders today at 12:00 p.m. Eastern. At the meeting, AMC will reveal votes for the following proposals.
- Share Increase Proposal: To increase the number of authorized shares to 550 million from 524.17 million.
- Reverse Split Proposal: To enact a 1-for-10 reverse stock split. This proposal, along with the share increase proposal, will permit the conversion of all outstanding shares of APE stock into AMC stock.
- Adjournment Proposal: T0 adjourn the meeting if either the share increase proposal or reverse split proposal are voted against.
The share increase proposal and reverse split proposal are intertwined in that the approval of each proposal requires the approval of the other. This is because the conversion of APE into AMC cannot go into effect without the approval of both.
AMC Stock: APE Surges Higher Ahead of Special Meeting
AMC has advised its shareholders to approve all three proposals, adding, “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.”
As of Feb. 8, there were a total of 517.58 million shares of AMC and 9.29 million shares of Series A preferred stock, represented by 929.84 million APE shares.
Meanwhile, the move to convert APE to AMC has attracted shareholder controversy. This has resulted in two putative stockholder class action complaints filed against the company. The complaints argue that AMC shareholders should vote separately from APE shareholders on the proposals or that APE shareholders should not vote at all.
On Feb. 27, the Court of Chancery entered a status quo order. This means that if approved, AMC will not be able to enact the proposals until the plaintiffs file a preliminary injunction motion. The court has scheduled a hearing for the preliminary injunction motion for April 27.
AMC also announced a resale of up to 232.43 million APE shares for Antara Capital ahead of the meeting. Antara will own zero shares following the completion of the offering.
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.
