Shares of AMC Entertainment (NYSE:AMC) are falling today, while AMC Entertainment Preferred Equity Units (NYSE:APE) are rising. This follows the issuance of a recommendation from special master Corinne Elise Amato. Amato was appointed by Delaware’s Court of Chancery to give her opinion on the conversion of all outstanding APE stock into AMC and gave a general recommendation to follow through with the settlement, or conversion.
AMC had previously proposed to convert all APE into AMC, increase authorized AMC common stock, and initiate a 1-for-10 reverse stock split. Shareholders weren’t all too happy with the proposals and filed a class action to bring the proposals to a halt.
On April 3, several plaintiffs reached a term sheet agreement with AMC that would see them receive one share of AMC for every 7.5 shares owned following a 1-for-10 reverse split and a conversion of shares. This settlement would also allow AMC to follow through with its proposals by lifting the status quo order. The court eventually denied the order.
AMC Stock: ‘Special Master’ Recommends APE Conversion
Following the submission of the term sheet, several shareholders filed objections to the settlement:
“Plaintiffs’ counsel received more than 3,700 timely documents, some styled as objections (the ‘Objections’). Some complied with the Court-ordered requirements to submit a proper Objection; many did not.”
These objections contained concerns about synthetic AMC shares, dark pool trading, and “Wall Street corruption.”
Amato went on to explain that none of the objections had merit, stating that:
“No Objections caused me to doubt that the Court should certify a class for Settlement purposes and that notice was adequately disseminated to AMC stockholders.”
Ultimately, Amato recommended that the court should deny all objections to the settlement. She spent time on both the “get” and “give” arguments. The “get” argument describes class members receiving 1 share of AMC for each 7.5 shares owned following a reverse split. The “give” argument describes a broad release of the claims from the class action.
Interested parties will then have until June 28 to file any exceptions or recommendations to Amato’s conclusion. After that, a two-day settlement hearing will be held on June 29 and June 30.
On the date of publication, Eddie Pan did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
