Shares of AMC Entertainment Holdings Inc. rocketed more than 60% higher on Friday after a judge in Delaware shot down a settlement that would have allowed the movie-theater chain to move ahead with a plan, maligned by some investors, to dump more shares onto the market, according to reports.
AMC
AMC,
has wanted to turn its its so-called APE — or AMC Preferred Equity — preferred units into common stock. But Delaware Chancery Court Vice Chancellor Morgan Zurn rejected an earlier settlement that would have allowed that conversion to move forward.
The theater chain has been looking to find ways to boost its share count and sell more shares — a tack that helped it through the COVID-19 pandemic — as it tries to shore up its finances and rein in its debt, the Wall Street Journal noted.
But not every investor was on board with the plan, amid worries about share dilution.
“At this juncture, the Court’s only task is to approve or reject the proposed
settlement,” wrote in the ruling, obtained by Bloomberg Law. “The focus of the settlement is on the claims presented in this case. The Court cannot address issues that do not pertain to the fairness of the settlement.”
“Such issues raised by AMC stockholders include theories about synthetic shares, Wall Street corruption, dark pool trading, insider trading and RICO violations, and a request for a share count,” the ruling continued. “The Court’s role is limited to considering settlement-specific issues, like the strength of the plaintiffs’ claims, the consideration the class would receive, and the scope of the release the class would give in exchange for that consideration.”
“To cut to the chase, the settlement cannot be approved as submitted,” the ruling added later.
AMC did not immediately respond to a request for comment.
This story originally appeared on Marketwatch
