/cloudfront-us-east-2.images.arcpublishing.com/reuters/JIQZYAQHVVOH5JUI5HK4ZZ235Y.jpg "AMC stock sinks, preferred units climb after conversion settlement")
Adam Aron, Chairman of the Board and CEO, AMC Entertainment, speaks at the 2021 Milken Institute Global Conference in Beverly Hills, California, U.S., October 18, 2021. REUTERS/David Swanson/File Photo
Aug 14 (Reuters) – AMC Entertainment’s (AMC.N) shares slid 35% on Monday on fears that the approval of a revised stockholder settlement will allow the company to issue more shares to raise capital, a move that will dilute the worth of each common share.
The common shares dropped to $3.45, levels just before the meme stock mania of January 2021 when retail traders hyped up the stock on online forums like Reddit.
The preferred stock units called “APE” , which trade at a significant discount to common shares, jumped 15% to $2.05.
Under the settlement, AMC will provide stock worth an estimated $129 million to common shareholders to settle potential legal claims related to a stock conversion plan.
The approval comes just three weeks after the judge rejected a prior version of the settlement.
The ruling allows AMC to follow through with a plan, announced in March, to convert preferred share units into common stock, a one-for-ten reverse share split and potentially sell more shares to help pay down some of its $5.1 billion debt.
The reverse stock split is expected to take effect on Aug. 24, AMC said on Monday, with “APE” ceasing to trade from Aug. 25, while its Class A common stock is expected to increase to 550 million from about 524 million.