Headline – Following Friday’s court decision blocking their proposal to convert preferred stock into common stock and issue millions of new shares, AMC Entertainment shares increased 37% on Monday. – a news that comes amid a massive week at the box office and a reversal of the company’s proposed ticket pricing scheme.
1.On Friday, Delaware Judge Morgan Zorn canceled the AMC plan to convert its favorite equity shares into common shares. With this step, he hoped to eliminate his debt, but it will result in a decrease in the value for shareholders.
2.The objective of that plan was to conclude a case filed in February, alleging manipulation in the company’s stock conversion by a shareholder’s vote.
3.According to Bloomberg, after being criticized for writing off the deal in opposition to more than 2,800 investors, Zorn stated that she could not accept this deal because it would forgive many claims of favored shareholders who were not represented in the case.
4.In response, AMC presented a modified plan in court on Saturday for resolving the matter, the details of which are not yet public.
5.Around 1:15 PM, AMC Entertainment’s shares reached $6.06. Eastern time on Monday.
AMC Entertainment is known as “Meme stock,” or a stock that benefited from the frenzy of large social media speculation, leading to an incredible and often unpredicted surge in its price due to its unconventional investor base. A collection of retail investors gathered together at the start of 2021, informally coordinated through internet Reddit communities.
AR/WallStreetBets, AMC Entertainment, and other shares came together for purchase, which had been reduced by major investment firms. This rapid frenzy of buying skyrocketed the price: in June 2021, it reached an all-time high of $72.62. AAMC was in risk of going bankrupt at the time, but the corporation was able to raise money thanks to the rising stock value and avert that fate.
The company is still struggling with debt, and CEO Adam Aaron said that he hopes that if the revised plan is approved, it will help them raise the necessary funds to pay off that debt through this stock transformation.
On Sunday, Aaron wrote to investors, “AMC should be cautious about raising capital. The risk of financial collapse is not to be taken lightly.” He indicated, as a warning, towards the companion theater chains Regal Cinemas and another meme stock, Bed, Bath & Beyond, which went bankrupt, leaving their shareholders empty-handed.
AMC Entertainment’s share price has seen a significant increase after a blockbuster week at the American box office. According to The Hollywood Reporter, Warner Bros.’ “Barbie” earned over $160 million in the United States, while director Christopher Nolan’s biopic thriller “Openheimer” earned over $80 million. Following these two films, American theaters witnessed the fourth-largest box office weekend in history. AMC stated that it was watched by 7.8 million moviegoers.
On the international level, the film industry was performing exceptionally well after the weekend of 2019, before the COVID-19 pandemic wreaked havoc on it. The films benefited from a viral social media trend called “Barbenheimer,” where moviegoers planned to watch two consecutive movies with interconnected themes. Almost two weeks ago, AMC reported that 20,000 people had purchased double-feature tickets for both films.
However, the theater chain recently reversed its controversial plan, which it had announced in February, to charge extra for better-viewing seats on the screen. AMC stated in a press release on Thursday that the sale of lower-priced seats in pilot theaters did not show significant growth or improvement, leading them to cancel the plan.
Judge rejects AMC settlement on stock conversion, causing surge in shares