Analysis-AMC sets unusual shareholder vote for meme stock sale approval By Reuters

By Anirban Sen

(Reuters) – AMC Entertainment (NYSE:) Holdings Inc, the movie theater operator that became a “meme stock” during the COVID-19 pandemic, has come up with an unusual way to win shareholder approval for stock sales that would raise cash, according to a regulatory filing and six corporate finance experts who reviewed it.

AMC raised more than $2 billion through stock sales in 2021, largely on the back of retail investors who sent its shares on a wild rally, along with other meme stocks such as GameStop Corp (NYSE:).

This helped it avoid the fate of bankrupt peer Cineworld Group LLC but also diluted its shareholders ninefold. Investor pushback against the dilution prompted the Leawood, Kansas-based company in July 2021 to cancel a shareholder vote on allowing it to issue more shares, its chief executive Adam Aron tweeted at the time.

Now, AMC is asking shareholders for authorization to further increase its common stock count tenfold. Instead of putting this to shareholders in a standalone vote for approval, it has bundled it with a separate proposal popular among investors to convert its deeply discounted preferred stock into common stock, a regulatory filing published by AMC on Jan. 27 shows.

Holders of the preferred stock will be allowed to vote on the matter alongside holders of common stock. Since there are 1.8 preferred shares for every common share of AMC, preferred stock voting in favor of the conversion can easily outnumber common stock voting against the authorization for more common stock sales, according to six corporate finance professors interviewed by Reuters.

“This increases the odds of (the new common stock authorization) passing this time,” said Jacob Thomas, a professor of accounting and finance at Yale School of Management.

It was unclear how AMC shareholders will react on the bundling of the two issues into one vote, which is scheduled for March 14.

AMC spokespeople did not respond to a request for comment. In the Jan. 27 filing, AMC said securing authorization for common stock sales will provide it with “appropriate flexibility… without the expense and delay of a stockholders’ meeting” for investors to vote solely on this matter. It added that its board will determine when to exercise the right it will be given to issue more…