The AMC Entertainment Holdings Inc (NYSE: AMC) stock price edged 2.97% higher today despite facing another class-action lawsuit from holders of its preferred shares known as APEs. The movie theatre chain issued the APE preferred shares at the height of the meme stock rally in 2021.
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The new class-action lawsuit has been brought by APE holders who say they deserve to be issued new shares worth $129 million, just like what was issued to the common shareholders. The company recently settled another class action lawsuit by common shareholders who disputed the conversion of APE shares into common shares.
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AMC has argued that it faces dire financial straits if it cannot raise the much-needed funding by converting its APE shares into ordinary shares and issuing new shares to investors. The company must now respond to the new class-action lawsuit by issuing similar shares to the APE shareholders.
APE investor Michael Simons is the one who filed the new class action lawsuit at Delaware's Court of Chancery, arguing that AMC must issue the same number of shares to its preferred shareholders as it did to its ordinary shareholders to maintain their current shareholding in the company.
Simons noted that issuing the shares worth $129 million to ordinary shareholders diluted the existing preferred shareholders and went against the designation certificate that governs AMC's preferred stock.
We will be interested to see how the new class action lawsuit will proceed, given that thousands of ordinary shareholders opposed the previous settlement. However, the judge prevented the shareholders from launching a fresh lawsuit due to the company’s dire financial straits.
AMC seems unable to catch a break from its shareholders suing the company after the meme stock rally that helped it avoid filing for bankruptcy protection. AMC’s competitor Cineworld was not as lucky and had to file for Chapter 11 bankruptcy protection in the United States.
Cineworld recently emerged from its Chapter 11 bankruptcy cases but is now a private company after cancelling the London listing of its shares. The company is now majority owned by its lenders, who converted most of their outstanding debt into equity.
AMC stock price.
The AMC stock price was trading up 2.97% at $4.17, rising from Thursday’s closing price of $4.04.
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