AMC shareholders approve significant actions that will help the company raise new cash and convert APE units

AMC shareholders today overwhelmingly approved two provisions that will dramatically improve the company’s ability to raise new cash by issuing and selling shares and increase the stock price in a 10-for-1 stock split.

Approval at a special meeting of stockholders will also trigger the almost immediate conversion of AMC Preferred Equity Units, or APEs, into common stock.

The only problem is that the measures cannot yet be implemented because a lawsuit is pending in Delaware District Court from an AMC shareholder trying to block it. A judge set a court date for April 7 to issue a restraining order.

“We will vigorously contest the allegations by the Delaware Court of Chancery that we are not following the will or our shareholders,” AMC CEO Adam Aron said at the meeting. “Your vote today sends a very strong signal that we are doing exactly what you want us to do.”

About 80% of the votes cast approved an amendment to the giant theater chain’s charter to increase its common stock license to 550 million shares. About 87% of the votes cast supported the 1:10 reverse stock split, which consolidates the number of existing shares held by shareholders into fewer but more valuable shares. This does not change the value of the company, only the share price. Shares of AMC, a so-called meme stock, are extremely volatile, ranging from less than $4 to more than $34 over the past 52 weeks. It rarely happens, but when a company’s stock falls for too long and falls too low, they run the risk of delisting from the stock market.

AMC’s base, which consists mostly of private or individual shareholders, has historically not wanted the company to issue new shares because it dilutes the value of their holdings. For this reason, last year Aron created the new publicly traded APE units that can be issued and sold without authorization. The problem is that the value of APEs, designed to track AMC shares, has fallen sharply, making them much less useful as a currency than hoped. If the court allows the company to continue, the APES will disappear.

“I want to commend our shareholders for the wisdom you showed in your vote to approve this proposal, and by such a wide margin,” Aron said. “The surest way to fight naysayers and doomsayers is to keep our cash reserves robust.”

AMC avoided bankruptcy during and after Covid and has made some progress cleaning up its balance sheet, but it is heavily in debt and really at the mercy of the theatrical release schedule and box office. Aron said he needs the ability to raise cash as a buffer against a still-uncertain market and, if he sees interesting deals, to add new theaters to his portfolio.

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