© Reuters. FILE PHOTO: Times Square characters who pose for photos for money walk past an AMC theatre amid the coronavirus disease (COVID-19) pandemic in the Manhattan borough of New York City, New York, U.S., January 27, 2021. REUTERS/Carlo Allegri/File Photo
(Reuters) -A U.S. court on Wednesday denied AMC Entertainment (NYSE:) Holdings Inc’s request to lift a status quo order on converting its preferred stock into common shares.
In February, AMC investors sued the theater operator accusing it and several of its directors of violating a law by creating the preferred shares in an attempt to “eviscerate” the voting power of common stockholders who had not supported the issuing of new shares.
The preferred shares, which AMC listed under the symbol “APE”, have lost over 70% since they were issued in August as part of a plan to pay down the company’s piled up debt.
Shareholders voted last month in favor of increasing the total number of authorized shares and carrying out a one-for-10 reverse stock split, as part of a plan to convert its preferred shares into common shares.
Following this, AMC announced earlier this week that it entered into a binding settlement with some investors and that it would ask a judge to lift a related status quo order, in order to speed up the stock conversion process.
AMC said that as part of the settlement, it has agreed to pay the plaintiffs one share for every 7.5 shares they own. Lawyers for the plaintiffs had said they expected the shares paid to their clients to be worth over $100 million.
“The parties offer no good cause to lift the status quo order,” Delaware Chancery Court judge Morgan Zurn wrote in the ruling.
AMC’s shares rose 14.3% in premarket trading on Thursday, while preferred APE stock dropped 11.7%.
In a regulatory filing on Thursday, AMC said it was continuing to evaluate next steps and that it would not make the litigation settlement payment until the court lifts the status quo order.
