AMC Shareholders File Lawsuit Accusing Company of Bypassing Them to Increase Shares
A group of AMC Entertainment Holdings Inc shareholders has filed a lawsuit in Delaware, claiming that the movie theater chain has violated state law by bypassing them to increase the number of shares. The Allegheny County Employees’ Retirement System, which filed the proposed class action on Monday, alleges that the company and several directors “eviscerated” the voting power of common stockholders by issuing new shares, which they had not supported.
AMC, which became a “meme stock” during the COVID-19 pandemic, raised over $2 billion in 2021 as retail investors bought up its shares and others, including GameStop Corp, which short-sellers had bet against. Last year, AMC created preferred shares, which trade on the New York Stock Exchange as “APE.”
The pension fund alleges in the lawsuit that the creation of the preferred stock was an attempt to circumvent the will of the shareholders. The company is set to hold a shareholder vote in March, which would convert preferred shares to common shares and authorize it to increase its common stock count tenfold.
The pension fund has asked the Delaware Chancery Court to declare the preferred shares invalid and to ban holders of the preferred shares from voting. However, experts have warned that because there are 1.8 preferred shares for every common share of AMC, the preferred stock voting in favor of the conversion could easily outnumber common stock voting against the authorization for more common stock sales.
On Tuesday, AMC’s shares closed up 16.4%.