AMC Entertainment’s (AMC) 1-for-10 reverse stock split is scheduled to go into effect on Aug. 24.
The reverse split is still on track to occur, despite opposition from Objector Rose Izzo.
AMC stock is down by more than 20% today.
Earlier this month, Delaware’s Chancery Court gave AMC Entertainment (NYSE:AMC) the green light to proceed with a 1-for-10 reverse stock split and an increase in authorized shares. The split will likely go into effect on Aug. 24. Together, these two actions would allow for the conversion of all AMC Entertainment Preferred Equity Units (NYSE:APE) into AMC stock.
Following the ruling, Objector Rose Izzo filed an interlocutory appeal and motions for a status quo order pending appeal and a shortened response time for the appellees, or the plaintiffs and defendants. Izzo also filed a motion for expedited scheduling of her interlocutory appeal, although this was rejected by the court.
The appellees were both in opposition of the status quo motion. They cited that the order would hamper AMC’s efforts to raise additional capital and increase the risk of bankruptcy. Izzo argued that a conversion could not be undone if the previously agreed upon settlement was later rejected. Izzo also believes that the court “overestimated the potential harm from a brief stay” because it recently reported its first profitable quarter since 2019.
AMC Stock: Court Rejects Rose Izzo’s Appeal Motion
Ultimately, the Chancery Court denied Izzo’s motion for a status quo order stay pending appeal. The court also added that Izzo did not specify a schedule for an orderly resolution of the interlocutory appeal. As a result, it was unclear how long AMC would be ineligible to raise capital if the status quo was set in place pending appeal. Additionally, the court believes that issues identified by Izzo for appeal “can be decided post-closing without risking the serious harm that AMC might suffer if settlement approval is delayed.”
This is a major win for CEO Adam Aron. He has made it very clear that he supports raising equity capital. As part of the settlement, 99.54 million shares of AMC will be issued as part of the conversion, while APE stock is expected to cease trading on Aug. 25. Afterward, it will be delisted from the New York Stock Exchange (NYSE).
On top of that, eligible shareholders will receive 10 shares of AMC for every 75 shares owned on a pre-reverse split basis. AMC estimates that it will issue 6.92 million shares as part of this process.
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