Why AMC Shares Are Ripping Higher Premarket Today

Shares of AMC Entertainment Holdings, Inc. AMC are skyrocketing before the opening bell on Monday, extending the strength from Friday's after-hours session.

The spike was in reaction to the Delaware Court of Chancery’s ruling against a settlement proposed by the company that will allow it to convert its preferred equity shares known as APEs into common shares and implement a 10-for-1 reverse stock split.

AMC intended to do the transactions to be able to sell additional shares and raise capital to avert potential bankruptcy. This was met with opposition from certain shareholders, who sued to block the transactions. The company later reached a settlement with these shareholders, agreeing to give an extra share for every 7.5 shares owned.

Other investors, who rejected the settlement, took up their objections with the Delaware court ahead of a two-day trial held last month.

In an open letter tweeted on Sunday, AMC CEO Adam Aron said raising fresh equity in the near term is critical to the company. The company is working to address the concern raised in the Delaware Court of Chancery's ruling on Friday, he said.

He also emphasized the inability to raise capital materially increases the company running out of cash in 2024 or 2025, or being unable to refinance and stretch out the maturity of some of its debt.

Aron also called out for support to beat the short thesis, which according to him, will be possible only if the bankruptcy risk is off the table.

In premarket trading on Monday, AMC shares rallied 48.18% to $6.52 and APE preferred units traded up 1.11% at $1.82, according to Benzinga Pro data.

See Also: How To Buy AMC (AMC) Stock

Photo via Shutterstock