On August 11, 2023, Delaware Vice Chancellor Morgan Zurn approved a revised settlement between AMC Entertainment and a group of shareholders who sued the company over a stock conversion plan.
The settlement provides common shareholders with stock worth an estimated $129 million. The settlement does not allow shareholders to opt out.
The settlement addresses Zurn’s concerns in his July 21, 2023, decision rejecting the initial settlement, which did not adequately protect the interests of preferred shareholders who were not represented in the lawsuit.
The revised settlement removes the provisions that would have settled potential claims by preferred shareholders.
The settlement is likely to be appealed by some shareholders, who have raised concerns about the lack of an opt-out provision and the impact of the settlement on the value of their shares.
The company was sued in February 2023 for allegedly rigging a shareholder vote that would allow AMC to convert preferred stock to common stock and issue hundreds of millions of new shares.
The investors who sued alleged that AMC had come up with the plan to circumvent the will of common stock holders who opposed the company diluting their holdings.
Without the proposed settlement, common stockholders and preferred shareholders would end up owning 34.28% and 65.72% of AMC, respectively. Under the proposed settlement, common stockholders and preferred shareholders would own 37.15% and 62.85%, respectively.
The case is In re: AMC Entertainment Holdings Inc. Stockholder Litigation, No. 2023-0215, in the Delaware Court of Chancery.
The approval of the revised settlement is a significant victory for AMC, as it allows the company to move forward with its stock conversion plan and raise much-needed capital. However, the settlement is likely to be challenged in court, and it remains to be seen whether it will ultimately be upheld.