• Court waves through AMC’s share conversion
• Business and shareholder benefits
• Shareholders have no opt-out right
AMC stock takes center stage over meme rally
The US cinema operator AMC has been in the public eye in recent years mainly because of its status as a meme share on the stock exchange. The film theater chain has not been doing well financially in recent years, which is why the AMC share has increasingly become the target of short sellers who are betting on the paper’s falling prices. However, retail investors, colluding on online forum Reddit, sent AMC stocks – and those of other companies like GameStop – well into the upside in early 2021, triggering a short squeeze and forcing short sellers to liquidate their positions at losses.
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AMC shares deep in the red
Although AMC stock on the NYSE has since bounced back from its highs, it’s still mostly trading at higher prices than before the WallStreetBets movement began. Last Friday, however, Meme stock suffered significant losses in after-hours Wall Street trading. And Monday’s trading also continued to go down: At the end of trading, AMC shares were listed 35.46 percent lower at 3.3950 US dollars.
Court approves conversion to common stock
The plunge follows news that a Delaware court has approved a stock conversion plan for the company, MarketWatch reports. An earlier version of the plan was rejected by the court last month, but Judge Morgan Zurn has now approved the revised version. This clears the way for AMC to convert the depository receipts, known as preferred equity units, into ordinary shares in order to bring more shares onto the market and thus experience financial strengthening. However, the plan met with criticism from private shareholders, as the market portal writes, since the shares could be diluted with it. More than 2,800 objections were raised by shareholders against the first version.
AMC shareholders can benefit from capital raising
Zurn wrote in a statement that the settlement agreement approved on Friday could only prevent a dilution of the common shares to a limited extent, but still brought advantages for AMC and the shareholders. The step ensures that there is “more equity in a ailing company” and that AMC can “achieve the necessary income”. According to the judge, the proportion of existing ordinary shareholders in AMC will increase by around three percent.
Billions of debt burdened
While AMC beat analysts’ expectations with earnings of $0.01 per share and revenue of $1.35 billion in the second quarter of 2023, the company is still burning cash quickly to keep operations going, as of emerged from the initial application for file conversion. However, if the company is able new shares spending, the 5.1 billion US dollar mountain of debt could also be worked off. The shares provided are said to be worth $129 million, according to MarketWatch. However, shareholders will not be granted an exit right as it would harm not only AMC itself but also the investors themselves, according to Zurn.
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