AMC Entertainment CEO Adam Aron said the Delaware Chancery Court’s decision late Friday to allow a reverse 1-for-10 stock split of the company was “inevitable” in the wake of the industry downturn caused by the pandemic.
A shareholder vote initially approved the move on March 14, after AMC was sued in February for allegedly manipulating shareholder votes to convert preferred stock into common stock.
AMC shares and its preferred stock APE were actively traded.
“AMC should now be able to raise additional capital,” Aaron said in a Monday post.
He added, “We can use this to shore up our cash reserves, pay down debt, invest in growth initiatives to enhance our operating profitability and pursue transformative M&A opportunities.”
Under the settlement, AMC will provide an estimated $129 million in stock to common shareholders to settle potential legal claims related to the stock conversion plan.
Aaron called the court’s ruling an “important milestone” and said details and a timetable for the APE unit conversion plan would be announced on Monday.
Aaron continued, “Some of you worry that mitigation will be a mistake no matter what. You’re wrong.”
“Companies that run out of money face financial ruin. Just ask Cineworld/Regal shareholders or ask Bed Bath & Beyond shareholders,” he said.
AMC raised $418 million in cash through the sale APE modules during the past 12 months.
The world’s largest cinema chain reported a surprise last week Quarterly profit The industry saw a slight boost after declining significantly since the pandemic.
Reuters contributed to this report.