AMC Entertainment (AMC) -) shares plunged lower Wednesday after the theater operator unveiled a widely anticipated plan to sell new common stock following a legal settlement with investors late last month.
In a Securities and Exchange Commission filing published Wednesday, AMC said it would look to sell 40 million new Class A shares and use the proceeds to pay down its debts, which are estimated at $5.1 billion.
The plan follows an Aug. 11 legal settlement with the Delaware Chancery Court between AMC and a group of disgruntled shareholders, who said the group's plans to convert special preferred share units -- known as APE units -- into common stock would dilute their investment.
AMC won the right to allow the APE unit conversion, which were exchanged on a 1 for 7.5 common share basis following a reverse 1-for-10 split of the common shares on August 24. The APE units are no longer listed.
"When AMC has the capability to raise much needed cash, those rooting or betting against AMCI face much more of an uphill climb," CEO Adam Aron told investors in a letter dated August 14.
"And with the convergence of AMC common shares and APE units, we hope and expect to be able to raise equity capital more efficiently and with less dilution than when the APE units were trading separately at a significant discount to AMC common shares.:
AMC Entertainment shares were marked 28.3% lower in early afternoon trading Wednesday immediately following the stock sale announcement to change hands at $9.80 each.
Last month, AMC reported a surprise second quarter profit of a penny a share, with revenue rising 15.6% to $1.35 billion. It said the current quarter was off to an "explosive" start thanks to the success of summer blockbusters "Barbie" and "Oppenheimer," which combined for the best box office opening weekend in four years in late July.
'Barbie,' the Warner Bros. Discover (WBD) -) film about the eponymous Mattel (MAT) -)-made doll staring Margot Robbie and Ryan Gosling, has taken in $1.35 billion in global office receipts since its late July debut, according to Comscore data, surpassing 'Super Mario Bros. Movie' as the biggest hit of the year.
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