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AMC Entertainment stock (NYSE:AMC) slipped 24% after hours Friday — and AMC Preferred Equity units (APE) jumped 22% — after a Delaware court approved a revised plan to convert the APEs into common stock.
Delaware Vice Chancellor Morgan Zurn had declined to approve a settlement paving the way for the conversion in late July, but late Friday signed off on the newly revised settlement offer.
AMC had pursued a plan to convert APEs into AMC common stock; execute a reverse stock split; and then issue shares to raise new capital.
That resulted in litigation to stop the plan, and then a quick class-action settlement that would allow its progress. The Court of Chancery applied the brakes so it could review the settlement, then rejected it on the first time around.
“This is my second opinion considering the settlement terms,” Zurn wrote. “The first was issued on July 21, 2023, and declined to approve the settlement because the release was unsound.”
“The day after the July 21 Opinion, the parties cut the offending provision from the release and asked the Court to consider the settlement as revised,” she added.
She concluded: “The Proposed Settlement is approved, Plaintiffs’ counsel are awarded a 12% fee award, and Plaintiffs are awarded $5,000 incentive awards out of their counsel’s fee award.”
The decision clears the path for AMC to pursue raising new capital through the conversion, split and issuance plan.
