(Bloomberg) – AMC Entertainment Holdings Inc. Common stock sank and its preferred shares rose after investors approved a series of moves that the movie theater operator said would help raise cash and reduce debt.
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Voting at a special meeting on Tuesday, investors supported the company’s plan to increase outstanding shares and implement a 1-for-10 reverse stock split. The two proposals would allow the company to convert a recently issued series of preferred shares, known by their trading symbol APE, into common stock, although the move is being challenged in court.
Taken together, the measures should give flexibility to AMCs to issue new stock, exchange debt for shares or make acquisitions. The theater chain has struggled to stay afloat after borrowing heavily and then seeing its business collapse in the pandemic.
APE shares soared as much as 22% on the news, but have since pared those gains and are now up nearly 7% at $1.84. AMC common stock fell 12% to $4.79, narrowing the gap between the two asset classes to $2.82.
“I want to commend our shareholders for the wisdom displayed at this meeting,” said Chief Executive Officer Adam Aron. The AMC said the results of the vote would help deal with “slanderers and prophets of doom”.
Litigation in Delaware is challenging the stock increase. Arron told investors last month that there would be no conversion until the legal issues were resolved.
The company, based in Leewood, Kansas, is the largest owner of movie theaters in the world. AMC avoided bankruptcy two years ago by selling new shares to meme-following day traders. The same investors opposed the proposal to increase the number of shares of the company in 2021 and the AMC dropped the plan to do so.
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Theater chains including Cineworld Group Plc, which filed for bankruptcy last year, are making a slow recovery in movie production. Ticket sales are down about a third from 2019 levels, with many consumers preferring to watch movies at home over streaming services.
Shareholder advisory firms Institutional Shareholder Services and Egan-Jones Proxy Services recommended that their clients support the AMC’s proposals.
With the assistance of Yiqin Shen.
(Updated throughout the stock movement.)
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