A view of the AMC Theater in Times Square in the Manhattan borough of New York City, New York, US, June 2, 2021. REUTERS/Carlo Allegri/File Photo Acquisition of licensing rights
WILMINGTON, Delaware, Aug. 15 (Reuters) – AMC Entertainment Inc (AMCN) has been hit by a class action lawsuit on behalf of preferred shareholders challenging its stock conversion plan, just days after the movie theater operator ended an agonizing legal battle. With a different group of investors.
AMC secured court approval Friday to settle a class-action lawsuit by owners of the company’s common stock, paving the way for the company to convert its preferred shares, known as APEs, into common stock.
AMC, a “meme” stock that was part of a social media-fueled trading frenzy in 2021 along with other companies such as Gamestop (GME.N), said the conversion plan is key to boosting its finances.
One of the owners of APEs said in the suit, which was filed late Monday but made public on Tuesday, that APE investors are being changed in the settlement approved on Friday.
AMC did not respond to a request for comment.
AMC agreed to settle the class action lawsuit by the common stock holders by providing them with additional shares valued at approximately $129 million. The common stock holders claimed that the company rigged the shareholder’s vote against them.
In the new lawsuit filed in Delaware court, investor Michael Simmons claims that AMC is obligated to provide the same amount of new shares to APE holders that the company offers to common shareholders in the settlement.
Simmons’ complaint said the settlement “has the effect of diluting preferred shareholders’ equity interest in AMC.” He also said it violated the certificate of designation that governed AMC’s preferred stock.
The lawsuit adds to the company’s most famous legal turmoil. Objections to a class-action shareholder lawsuit settlement are rare, but AMC has received thousands of investors who have questioned allegations about the company’s dire financial situation. The settlement was initially rejected by a Chancery Court judge in July before the judge signed off a revised deal on Friday.
Additional reporting by Tom Hales in Wilmington, Delaware. Editing by Josie Kao
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