The Form 4 showed that an undisclosed third-party holder exercised call options, as indicated by transaction code “X” on the form. This obligated Antara’s Master Fund to short 11,300 shares of AMC stock to complete the delivery of shares. The shares were borrowed from an “unaffiliated broker.” A Form 4 dated April 4 showed that Antara owned zero shares of AMC. As of April 20, Antara owned zero shares of AMC as well.
“The disposition of such call option as a result of its exercise and the sale of such underlying shares of Class A Common Stock were exempt from Section 16(b) matching pursuant to Rule 16b-6,” said the filing.
Antara Capital Discloses Shorting AMC Stock
This isn’t the first time that Antara has shorted AMC. Going back to the April 4 filing, Antara disclosed shorting 50,000 shares to deliver them to another party. On April 3, Antara disclosed shorting a whopping 750,000 shares for the same reason. So, what exactly is Antara doing here?
InvestorPlace’s Tom Yeung believes that Antara is selling calls on AMC in order to bet on a price convergence between AMC and APE without having to short AMC itself. On March 14, shareholders of AMC Entertainment voted to allow the firm to convert all preferred APE shares into AMC common stock, which would cause the prices of the two to converge. However, the conversion has been placed on hold due to a status quo order from Delaware’s Court of Chancery. The order was enforced following two class actions that alleged that AMC and APE shareholders’ votes should be counted separately when voting on proposals.
AMC actually reached a settlement with the filers of the class actions, which saw the plaintiffs agree to lift the status quo order in return for Class A common stock. However, the Court of Chancery denied this motion. On April 27, a hearing for the preliminary injunction motion will be held.
AMC has confirmed that it will report its first-quarter earnings on May 5 before the market open. Shareholders should expect to receive more information on the pending conversion before or on that date.
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.