(corrected in second paragraph)
Written by Tom Hales and Judy Godoy
WILMINGTON, Delaware (Reuters) – A Delaware judge on Friday approved a revised settlement for AMC Entertainment stockholders, three weeks after the judge rejected a related agreement made by the movie company.
The ruling sent the company’s preferred stock price up 27%. The company’s common stock fell 27%.
AMC told investors it was burning money at an unsustainable rate and that the settlement would pave the way for the company to sell more shares and pay off some of its $5.1 billion in debt.
Under an approved class action settlement, AMC will make available stock estimated to be $129 million to holders of common stock to settle potential legal claims related to the stock conversion plan.
The approved class settlement did not allow shareholders to opt out and bind them to the agreement.
On July 21, the same judge, Delaware Vice Chancellor Morgan Zorn, dismissed an earlier version of the settlement because it also settled potential claims by preferred shareholders who were not represented in the suit.
That clause was removed from the proposed settlement that Zorn agreed to on Friday.
More than 2,800 objections to the initial settlement were filed by shareholders, a level of interest Zorn called “unprecedented”. Many of these objectors sought permission to withdraw from the settlement and sue on their behalf, dismissing AMC’s dire financial predictions as “fear tactics.”
Zorn said a withdrawal is not possible and would be harmful to the company and its shareholders.
The company was sued in February for rigging a shareholder vote that would have allowed AMC to convert preferred stock into common stock and issue hundreds of millions of new shares.
Investors suing the alleged AMC Corporation came up with a plan to circumvent the will of common stock holders who opposed the company diluting their holdings.
Without the proposed settlement, the common shareholders and preferred shareholders would end up owning 34.28% and 65.72% of AMC, respectively. Under the proposed settlement, common shareholders and preferred shareholders will own 37.15% and 62.85%, respectively.
The case is at issue: AMC Entertainment Holdings Inc. Stockholder Litigation, No. 2023-0215, in the Delaware Court of Chancery.
(This story has been corrected to show that the company’s common stock is down 27%, not up 27% in paragraph 2)
(Reporting by Tom Hales in Wilmington, Delaware; Editing by Debbie Babbington)