“They have proven that the game is rigged.” “I love movies, I love theater, and I saw the chance to be part of something that would preserve and build America up,” Barton said. He said with his voice breaking that his involvement with AMC had shaken his faith in the US financial system. The other, John Barton-who described himself as a US Air Force veteran and longtime commercial airline pilot-offered a wide-ranging attack on Wall Street corruption. One of them, Rickey Brogan, said he had driven 10 hours from Tennessee to speak in public for the first time. ‘Game Is Rigged’Ĭase in point: The two investors who showed up without attorneys Thursday to speak against the settlement. “AMC triggers a lot of passion,” he said. Lebovitch was one of at least two dozen attorneys filling Zurn’s courtroom. A brief evacuation following a fire alarm interrupted Thursday’s hearing just after it started. The hearing began with special accommodations by the court to account for the high level of interest: Extra metal detectors stood outside the courtrooms, and two overflow rooms were reserved for investors. A “better” deal that harmed the company, and its stock price, wouldn’t have helped anyone, he said. But that might not have left investors better off, Lebovitch said, noting that it was important to strike a balance. He acknowledged that it’s possible the class action plaintiffs could potentially have gotten a nominally better deal if they’d litigated longer and won some preliminary rounds. “We thought we would get resounding applause for the settlement, but we were wrong,” he told Zurn. Lebovitch, speaking early in the hearing, expressed surprise at the groundswell of opposition to the deal. The class action settlement, valued at more than $100 million, would let the APE conversion proceed while handing out extra stock-one class A share for every 7.5 held-to mitigate the dilution of ordinary investors. But the units have tended to trade at a steep discount due to uncertainty about the conversion. AMC’s loan financing has been complicated by rising interest rates, and many retail investors either oppose a move that would dilute their shares or just don’t vote on company proposals.Įach APE-AMC Preferred Equity unit-represents 1/100th of a preferred share theoretically worth 100 class A shares, so they’re supposed to be equivalent to common stock. The company issued the APE units last year, including the bloc to Antara, and has sought to recapitalize by converting them into common stock. “I have heard what you have to say,” she told the two who came to court Thursday. Zurn acknowledged the “fervent and inspired AMC stockholders” as she opened the hearing. Roughly two dozen shareholders lined up to formally object to the deal at the two-day hearing, and hundreds of others wrote to the court to oppose it. The APE units have pitted AMC and its leaders against many of the amateur investors who participated in the rally that rescued the movie theater chain from a pandemic-era bankruptcy. Everyone loses if AMC can’t recapitalize by converting the APE units into common stock, class counsel told Zurn earlier Thursday.Īlthough the APEs may not initially have done much harm, AMC “weaponized” the preferred units by selling a 30% bloc to hedge fund Antara Capital LP in an effort to tilt the scales before a key investor vote, according to Mark Lebovitch of Bernstein Litowitz Berger & Grossmann LLP, who represents the pension fund and an individual shareholder leading the litigation. The statements came after attorneys leading the class action and lawyers for the company urged the judge to approve the deal earlier in the hearing, which is set to continue Friday. They were ultimately stabbed in the back by the very people they saved.” “A group of stockholders saved a company that they believed was being destroyed by Wall Street insiders. “Why are people loud? Why are people upset? Why are people angry right now? Because they’re feeling like they’re not being heard,” he told Vice Chancellor Morgan T. The “grossly unfair” agreement gives AMC’s board a free pass for its bad behavior and sends the message that companies can engage in illegal corporate engineering, then “just kick out additional shares to people and pay them off,” according to Kittila. The proposed settlement would force investors to give up too much in exchange for too little, Ted Kittila of Halloran Farkas & Kittila LLP, an attorney representing settlement objector Rose Izzo, told Delaware’s Chancery Court. broke its pledge not to convert its preferred equity units into common stock, one of the company’s “meme stock” investors said Thursday, objecting to a nine-figure settlement that would end litigation over the distressed cinema chain’s so-called APE units.
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