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id: 806, Created by Andrew Earley, Scout
AMC Entertainment Holdings case over shareholders dilution
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26 Sept 2022Class period Start
24 Aug 2023Class period End
- In September, 2022 AMC Entertainment Holdings Inc. announced its plan to sell up to 425.0 million preffered shares (APEs).
- In August , 2023 Delaware Chancery Court allowed company to convert all APEs into common shares.
- $AMC fell over 80% since September 2022 to the convertion date, damaging shareholders.
On September 26, 2022, AMC Entertainment Holdings Inc. announced its plan to sell up to 425.0 million APEs.
- Investors were dissatisfied with this policy, which allowed the company to bypass the limit on issuing common shares, fearing significant dilution of their shares in the future.
- Since the placement of preferred shares, they have traded at a large discount to ordinary shares, which reduced the company's ability to raise additional financing. Looks like that since then management has been concerned with circumventing these restrictions, rather than improving operating performance.
Ultimately, the company was able to develop a share conversion deal and secure the support of a number of funds. But the deal was subsequently disputed in court by the shareholders.
- Under the settlement, the current shareholders of the company receive 1 additional share of the company for every 7.5 shares they owned, which, in the opinion of management, compensates for the damage from dilution.
- After carrying out all the manipulations, AMC is going to dilute the shares again, so the terms of the transaction do not suit ordinary shareholders.
- The shareholders tried to challenge the deal but it was approved and implemented as soon as possible.
Among other things, the following events raise questions among investors:
- In a 110-page opinion, Judge T. Zurn found that the plaintiffs’ claim of breach of fiduciary duty had merit and initially stopped the deal. But from the second attempt the judge made an unexpected decision and made The final approval of the deal.
- Investors write on social networks that AMC's CEO Adam Aron acted not in the company's best interests but in favor of specific funds, manipulated public opinion on social media, and caused significant losses to the company's shareholders.
Taking into account all the facts, investors have reasonable grounds to believe that their rights have been violated and they have suffered significant material damage, which the company and responsible persons must compensate.
Breach of Fiduciary duty
Shock Event Date
14 August 2023