"AMC doubles after hours, APEs slide 42% as settlement is rejected
Jul. 21, 2023 4:17 PM ETAMC Entertainment Holdings, Inc. (AMC), APEBy: Jason Aycock, SA News
Massimo Giachetti/iStock Editorial via Getty Images
https://seekingalpha.com/news/...s-slide-42-as-settlement-is-rejectedAMC Entertainment (NYSE:AMC) vaulted 61% after hours Friday, and as much as 100% -- and AMC Preferred Equity units (APE) nosedived 42% -- on word that a settlement paving the way for a share conversion was rejected by a Delaware court.
That marks a surprising win for the company's "Ape army" of meme-stock holders.
Delaware law provides that its Court of Chancery review all class-action settlements.
"Citing AMC’s financial situation, the parties have sought to present their settlement for approval on a compressed timeframe," Vice Chancellor Morgan Zurn wrote in her opinion. "Even moving quickly, the Court must ensure that the proposed settlement is fair and fulfills the principles of due process. To cut to the chase, the settlement cannot be approved as submitted."
The settlement purported to release not only claims tied to the common stock, but also claims associated with preferred interests that common stockholders might also hold, and "the release cannot properly extend to those latter claims." It also purports to release claims that don't arise from the same factual predicate, she ruled.
The plaintiffs being common stockholders, they can't release claims appurtenant to the preferred units, she added. "Awarding more shares to common stockholders necessarily comes at the expense of preferred units; the settlement consideration harms preferred unitholders."
AMC had pursued a plan to convert APEs into AMC common stock; execute a reverse stock split; and 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, and has now rejected it."
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