Delaware’s Chancery Court judge Morgan T. Zurn made a surprise ruling on Friday that blocked AMC Entertainment Holdings’ attempt to convert its AMC Preferred Equity Units (APE) into common stock. The company’s class A shares surged 63% as a result of after-hours trading.
The theater chain started issuing APE in early 2022 as a way to raise capital and pay its outstanding debt of $5.4 billion. It also intended to use funds for other operative costs. APE stock traded at $6.95 at one point before tumbling down.
The company has been trying to convert the APE shares into common stock for a while but has met with resistance from a portion of shareholders, who were concerned about the possible dilution of their holdings. This resulted in a shareholder lawsuit and AMC’s attempt to settle with them.
AMC’s original settlement proposal, believed to be worth more than $100 million, aimed to push the conversion plan through while addressing the concerns of the shareholders. However, now that Zurn rejected the settlement, the company will be forced to go back to the drawing board.
AMC class A shares closed at $4.40 per share on Friday, being 12% up year-to-date. After the ruling was made public, the stock jumped to $8.13 per share at one point in after-hours trading.