AMC slides 24%, APEs jump as new stock conversion settlement is approved

MC Entertainment (NYSE: AMC) experienced a 24% decline in after-hours trading on Friday, while AMC Preferred Equity units (APE) surged by 22%. This significant market movement followed the approval of a revised plan by a Delaware court to convert APEs into common stock. Delaware Vice Chancellor Morgan Zurn initially declined to endorse a settlement facilitating the conversion in late July. However, on Friday, she gave her approval to the newly revised settlement offer. AMC's strategy involves the conversion of APEs into AMC common stock, implementing a reverse stock split, and subsequently issuing shares to raise fresh capital. This approach led to legal proceedings aiming to halt the plan, followed by a swift class-action settlement designed to allow its progression. The Court of Chancery temporarily halted the process to scrutinize the settlement, ultimately rejecting it in its initial form. In her latest opinion, Zurn stated, "This is my second opinion considering the settlement terms. The first was issued on July 21, 2023, and declined to approve the settlement because the release was unsound." She went on to explain that the contentious provision was removed from the release following the initial opinion, prompting the parties to request the revised settlement's consideration. Zurn 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." This decision clears the path for AMC to proceed with its plans to raise new capital through the conversion, split, and issuance strategy.