AMC Entertainment's CEO, Adam Aron, issues a warning that the company may face a cash shortage in the next two years unless it is permitted to raise funds through a stock conversion.
This response comes after Delaware Vice Chancellor Morgan Zurn's decision on Friday, which blocked a proposed settlement allowing the movie theater chain to issue additional shares. The company is currently striving to recover from the financial impacts of the pandemic.
"AMC must be in a position to raise equity capital," Aron tweeted directly to to company investors. "I repeat, to protect AMC’s shareholder value over the long term, we MUST be able to raise equity capital."
My open letter message below to you all is on a subject of existential importance to AMC Entertainment shareholders. I urge you to read it. Adam Aron #AMCSurviveThenThrive pic.twitter.com/40tyncnr1n
— Adam Aron (@CEOAdam) July 23, 2023
In her decision, Zurn stated that she was unable to sanction the proposed settlement "as submitted," as it could absolve any potential claims from preferred shareholders not included in either the lawsuit or the settlement.
On Monday, there was a significant increase in the value of AMC stocks, whereas the preferred stock, known as Ape shares, experienced a downturn.
Aron indicated that during the special election on March 14, 72% of AMC's common shareholders and 91% of APE's preferred unit holders who participated in the vote expressed their desire to move forward with the conversion.
"Given the absolute imperative to be able to raise equity capital going forward, we take seriously the court’s Friday ruling," he continued. "In response, we along with the plaintiffs filed with the Delaware court, a modification of the legal release surrounding the settlement of the Delaware litigation in an effort to address the court’s concern."
In February, AMC faced a lawsuit accusing the company of manipulating a shareholder vote. This purportedly rigged vote would have permitted AMC to transform preferred stock into common stock, leading to the issuance of hundreds of millions of additional shares.
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