1- i wish i was qualified, cause working for Chance sounds like it’d be fun.
2- this post cements this substack’s legacy in the illustrious company of Blaise Pascal, Benjamin Franklin, Woodrow Wilson, et al, each who noted apologies for the length as there was no time to make it shorter. Damn right, too.
3- i think i spied a date typo for 242(d) legislation going into effect (2023, not 2022, right?)
4- is there any history of rulings that overtly state (words to the effect that) “ there is no equitable outcome possible, so we rule based on which outcome is the least harmful to the party most harmed by the ruling” or MiniMax Regret strategy?
You’re absolutely right, I — like those proposed scheduling orders — became completely unmoored from reality. I’ll fix. I love The MiniMax Regret Strategy shorthand and if it hasn’t come up yet, this is certainly a good candidate, eh? I will definitely poll the brain-trust on today’s team call. Also, training provided, so if you like reading and writing, don’t assume you need any particular training to work for me. Do I seem like someone hung up on a particular set of traditional metrics just for their own sake? We have three Delaware barred attorneys on staff, I think we are enough to cover that waterfront. Other types of brains welcome to apply.
Hi Chance, thank you for the detailed overview of this AMC mess. I think the one thing that is overlooked is the one sided give vs get. The “Elephant in The Room”. If approved, shareholders would GIVE dilution that allows Adam Aron access to 400 million new AMC shares valued at $12 Billion at $30 a share. Shareholders would GET $120 million, or about ONE PERCENT of that $12 billion in return. Shareholder would also GIVE 90% of their upside profit in a Reverse stock split so as to make room in the float for the 400 million new AMC shares. Shareholder get left holding the bag, Adam Aron gets a big bonus for pulling this off. The short sellers buy back all their short directly from Adam Aron, bypassing retail. Makes me sick.
Unless you are writing a check for $12 Billion as part of this settlement I am not sure how you can tell the court you are giving the company $12 Billion. You want to speculate as to what the company may be able to do with those new shares that is all nice and wonderful, but save that for trading decisions, not court.
look, I don't speak your language, so I can only use logic and reasoning to parse what you mean by "an implied forward market cap" but I assume the theory is due to the fact that after the reverse split and conversion there will be 385m new shares in treasury that can be sold into the market at whatever the then-current prices are ... presumably around $30 (if [and that's perhaps a big "if"] prices hold after r/s)? and of course, they won't all be dumped onto the market at once, because that would tank the price, and you can say that with whatever fancy words you have for it, but the access is there, with whatever nuance you want to add to the story, as far as I can see, unless I'm missing something, I think this is what they are referring to.
The true stock price if the settlement is approved will converge toward APE price. The market capitalization of the whole firm will be $3BB, so it's impossible to have any smaller piece of that be worth $12BB. Stock splits don't change the market value of a company. In a more common sense way, if Aron's shares were worth $12BB the company would be worth many multiples of that. Those kind of companies aren't talking about the perils of bankruptcy. Makes no sense, right? You can't add value just by printing more shares(you can by paying in capital) or everyone would just do that. You add value by selling more tickets or concessions etc.
Jul 11, 2023·edited Jul 11, 2023Liked by Chance the Lawyer
I can tell you that I love the idea of calling it Ghost Penciling(tm) and would like to petition for a license for use of it. I had thumbed through CaseMine and ended up at UniSuper LTD v. News Corp from Chancellor Chandler back in 2006, which made me all the more pleasantly happy it came up in Schumacher. It only reinforces that I have one super power and it is beating shitty free to use case law search engines with a sledge hammer like I'm some Nocker till it gives me the results I want. Though half the fun was chronicling the frustration of it all.
I am also glad to know I'm not the only one who noticed that VCZ didn't engage with the objectors and was going "hmmm...HMMMMM..."
With what a chonky boy this is I get the feeling I'm going to have to come back to this a few more times like Thanksgiving turkey in order to digest it. For what of the turkey I have turned into post-thanksgiving turkey noodle soup, turkey sandwiches, and whatever else and focus on what I've been able to eat and what you have said of VCZ I just don't think "gets comfortable" is a thing that will happen, especially with how emotional this case has become. I dunno maybe just me I favor the Ghost Pencil route if the release is the issue, especially since I see it as the only real issue atm. It seems like something that will happen if she does feel it is too wide. Even with the old boys club as it were the issues of overbroad release that sort of thing won't be allowed, sacrosanct maybe a good word for it. I mean even in UniSuper CC sent them to the drawing board not once but twice at least as far as I can tell from what I could find.
If that does go the CC route in UniSuper then this roller coaster ain't done yet because if there is one thing the market hates and loves like an abusive relationship it is volatility. Uncertainty and price fluctuation is what makes and loses people money. The variance between everyone's little opinions on a matter they have no clue about and wish to make their voice heard on, even if they will all be made wrong in the end. Even as I'm typing this out the market ripped the convergence apart briefly as it had its little temper tantrum that VCZ didn't give it what it wanted on Monday and now it is going to have to sit in the corner a bit longer like a good boy.
About the release being an issue, do you mean its broadness in including APE holders’ claims? Is it still problematic, particularly when APE holders voted overwhelmingly for the shareholder proposals being blocked?
Yes, as Chance pointed out that is potentially a possibility. The thing is the principal of the matter. Why yes their claims as to the R/S and convergence are stupid weak the release is for all claims arising out of this whole dirty mess going all the way back to the creation of the APE and the 242 claims.
Those are, if I am understanding things correctly, that VCZ seems to have issues with:
1. The 242 claims are weak but being used to foreclose the whole of the APE transaction in its entirety.
2. Even if -these- particular claims in relation to the corporate action itself are weak grounds for an APE transaction we don't know with certainty what other claims could exist that are being foreclosed on.
That is what is being seen as sus. This is being stretched extra wide because AAron (where is A-Aron) doesn't want another fight on this matter.
Thanks for explaining things to me! I know very little about law. In regards to knowing with certainty what other claims may exist, are the settlement parties really expected to boil the ocean and speculate on all potential claims and explain why the claims would not have merit? That does not seem feasible. Even expecting them to leave the door open to any and all claims by excluding APE holders from the release seems unreasonable. Leaving the door open could impede their ability to proceed with the approved shareholder proposals indefinitely. At what point should the company be allowed to move forward with their business?
They have $75m in insurance for this time period and companies have potential claims all the time for all sorts of things. I don't see how not having APE claims in the scope of the release in this case this would impede their ability in any meaningful way.
Tbh I really don't know a whole lot myself. I am not a professional like Chance. I just happen to be really good and bullheadedly determined to pound pavement on things like this. So I wouldn't take everything I say completely as gospel, but I do try.
As to the first question, they wouldn't have to speculate on those claims if they hadn't cast such a wide net in the first place. If they had said any claims of common shareholders arising out of the APE transactions that would have been less of a reach and more acceptable in the court's eyes, again assuming there is a concern that has yet to be seen. Instead they are trying to enjoin the potential claims of another class of shareholders that aren't party to these proceedings.
As to the second question aside from what Chance has already has replied with, are we not forgetting the rights of the shareholder to be secure in their investment and their claims to the company if they feel wronged. Sure AMC has a right to do business, but not in a way that abuses its owners, wither that be all classes as a whole or individual classes or series of them. The court sees the right to sue as an inherent right of a shareholder and using one class of shares to enjoin and foreclose another class of shareholders from exercising their rights is a pretty scummy tactic.
Hm. Your explanation makes sense to me, but the situation seems suboptimal and confusing for every party. It seems like there should be a statutory period for claims to be made by everyone with a bone in the game. They should be addressed by the company. Then the company should be able to proceed. As it stands, a subset of shareholders made some claims. They’ve been addressed to an extent. The company is trying to move forward, but technically, they can’t try to close the door on additional claims. So their best option would have been to pursue release of only the claims addressed by the settlement and then hurry through all the next steps before anyone else could file against them?
Thank you for your reflections on the case! About the released claims being overly broad by including any that APE holders may bring, would the broadness really be an issue considering no APE holders objected to the settlement (AFAIK)? I know they may not have qualified to be objectors if they were not AMC holders, but dubious qualifications didn’t seem to stop others from submitting objections.
Because they were not part of the class, they did not legally have standing to object to the settlement purely on that basis, and in large part Izzo’s objection was qua her APE holdership although she was a dual holder, so it’s a very strange situation.
Is the due process issue really a concern here that the court actually needs to consider?
If someone were to sue, first the company would need to raise the release to even be an issue and then a court could decide then if due process would be violated if the release is upheld there.
Like no real reason the court needs to decide that now.
As a non-legal educated engineer, thank you for the lengthy, but well laid out synopsis. I can't say that I understand this anymore than from where we started, but one take away that stood out (thank you), was the Twinklevoss analogy. As a dual holder of a large number of shares (some since 2019), I find arbitrage of APE against a holder of the stock being equal is ludicrous. Again, thanks for the cynical, twilight zone profane take on this crazy episode in American Corporate law! I can't say that the 22,000 words were all enjoyable to read (but I get the same on engineering test flight notes I make). You definitely make law a funny, yet palpable subject for one who is not versed in its finer points! Bravo!
1. I tried organizing my thoughts on this case and the arb situation by writing about it and it easily took several hours, and that's without any of the expertise, prose, and nuance you bring to your writing. To have written all of this in a day - that's just crazy. Brava!
2. As someone who thought that Ghost Penciling was one of the more likely outcomes for the case, prior to you publishing this, I have a lot to read up on and think about... oh boy
3. I'm sure I speak for many of your readers that we know exactly how it feels to get sudden epiphanies on words we formerly didn't properly understand! Happened to me many times on my second read through haha
Curious about how we'll learn about the Court's ruling? I know once it's ready, the written opinion will be filed in the docket and posted on the Court's website. But what I'm most curious about is when exactly it will be accessible to the general public and whether there's any way to gain early access to it. This is crucial, especially considering the likely immediate impact on stock prices.
The Court is very aware of this dynamic has made clear that they are not going to make any preferential access available: when it's posted on the docket, it will be posted to the website and thus made available to the general public.
Now that I have your attention, would you say it is safe to assume that it will be posted on the docket and the website simultaneously? I am asking because accessing the docket often involves a considerable delay for many of us.
It will be on the public docket potentially substantially later than it will be on the website. It will be on the internal docket (to the parties) essentially simultaneous with being posted to the website. The website is the place to be.
Each time I start typing out my thoughts here, a twist in each thought comes up. The case is obviously complex and hard to constrain to simple words. Good job elaborating on the issues here.
Em’ som’ mcdreamy paragraphs y’all got in air. Whooo we! I fe lik I cou’d pass da verbal part of the SAT after; battling through that royale’s memento following tenant and inception and ultimately finding transcendence at dunkirk (that’s a Christopher Nolan joke) 9/10 stars
1- i wish i was qualified, cause working for Chance sounds like it’d be fun.
2- this post cements this substack’s legacy in the illustrious company of Blaise Pascal, Benjamin Franklin, Woodrow Wilson, et al, each who noted apologies for the length as there was no time to make it shorter. Damn right, too.
3- i think i spied a date typo for 242(d) legislation going into effect (2023, not 2022, right?)
4- is there any history of rulings that overtly state (words to the effect that) “ there is no equitable outcome possible, so we rule based on which outcome is the least harmful to the party most harmed by the ruling” or MiniMax Regret strategy?
You are awesome, Chance. Thank you.
You’re absolutely right, I — like those proposed scheduling orders — became completely unmoored from reality. I’ll fix. I love The MiniMax Regret Strategy shorthand and if it hasn’t come up yet, this is certainly a good candidate, eh? I will definitely poll the brain-trust on today’s team call. Also, training provided, so if you like reading and writing, don’t assume you need any particular training to work for me. Do I seem like someone hung up on a particular set of traditional metrics just for their own sake? We have three Delaware barred attorneys on staff, I think we are enough to cover that waterfront. Other types of brains welcome to apply.
Hi Chance, thank you for the detailed overview of this AMC mess. I think the one thing that is overlooked is the one sided give vs get. The “Elephant in The Room”. If approved, shareholders would GIVE dilution that allows Adam Aron access to 400 million new AMC shares valued at $12 Billion at $30 a share. Shareholders would GET $120 million, or about ONE PERCENT of that $12 billion in return. Shareholder would also GIVE 90% of their upside profit in a Reverse stock split so as to make room in the float for the 400 million new AMC shares. Shareholder get left holding the bag, Adam Aron gets a big bonus for pulling this off. The short sellers buy back all their short directly from Adam Aron, bypassing retail. Makes me sick.
Unless you are writing a check for $12 Billion as part of this settlement I am not sure how you can tell the court you are giving the company $12 Billion. You want to speculate as to what the company may be able to do with those new shares that is all nice and wonderful, but save that for trading decisions, not court.
Now, this is true.
I don't follow. How does someone have access to $12BB of value from a company with an implied forward market cap of around $3BB in total?
look, I don't speak your language, so I can only use logic and reasoning to parse what you mean by "an implied forward market cap" but I assume the theory is due to the fact that after the reverse split and conversion there will be 385m new shares in treasury that can be sold into the market at whatever the then-current prices are ... presumably around $30 (if [and that's perhaps a big "if"] prices hold after r/s)? and of course, they won't all be dumped onto the market at once, because that would tank the price, and you can say that with whatever fancy words you have for it, but the access is there, with whatever nuance you want to add to the story, as far as I can see, unless I'm missing something, I think this is what they are referring to.
The true stock price if the settlement is approved will converge toward APE price. The market capitalization of the whole firm will be $3BB, so it's impossible to have any smaller piece of that be worth $12BB. Stock splits don't change the market value of a company. In a more common sense way, if Aron's shares were worth $12BB the company would be worth many multiples of that. Those kind of companies aren't talking about the perils of bankruptcy. Makes no sense, right? You can't add value just by printing more shares(you can by paying in capital) or everyone would just do that. You add value by selling more tickets or concessions etc.
You don't add the value when you print the shares. You get the value when you sell the shares ATM that you printed, into the open market.
I can tell you that I love the idea of calling it Ghost Penciling(tm) and would like to petition for a license for use of it. I had thumbed through CaseMine and ended up at UniSuper LTD v. News Corp from Chancellor Chandler back in 2006, which made me all the more pleasantly happy it came up in Schumacher. It only reinforces that I have one super power and it is beating shitty free to use case law search engines with a sledge hammer like I'm some Nocker till it gives me the results I want. Though half the fun was chronicling the frustration of it all.
I am also glad to know I'm not the only one who noticed that VCZ didn't engage with the objectors and was going "hmmm...HMMMMM..."
With what a chonky boy this is I get the feeling I'm going to have to come back to this a few more times like Thanksgiving turkey in order to digest it. For what of the turkey I have turned into post-thanksgiving turkey noodle soup, turkey sandwiches, and whatever else and focus on what I've been able to eat and what you have said of VCZ I just don't think "gets comfortable" is a thing that will happen, especially with how emotional this case has become. I dunno maybe just me I favor the Ghost Pencil route if the release is the issue, especially since I see it as the only real issue atm. It seems like something that will happen if she does feel it is too wide. Even with the old boys club as it were the issues of overbroad release that sort of thing won't be allowed, sacrosanct maybe a good word for it. I mean even in UniSuper CC sent them to the drawing board not once but twice at least as far as I can tell from what I could find.
If that does go the CC route in UniSuper then this roller coaster ain't done yet because if there is one thing the market hates and loves like an abusive relationship it is volatility. Uncertainty and price fluctuation is what makes and loses people money. The variance between everyone's little opinions on a matter they have no clue about and wish to make their voice heard on, even if they will all be made wrong in the end. Even as I'm typing this out the market ripped the convergence apart briefly as it had its little temper tantrum that VCZ didn't give it what it wanted on Monday and now it is going to have to sit in the corner a bit longer like a good boy.
Anywho thanks once again for your work!
About the release being an issue, do you mean its broadness in including APE holders’ claims? Is it still problematic, particularly when APE holders voted overwhelmingly for the shareholder proposals being blocked?
Yes, as Chance pointed out that is potentially a possibility. The thing is the principal of the matter. Why yes their claims as to the R/S and convergence are stupid weak the release is for all claims arising out of this whole dirty mess going all the way back to the creation of the APE and the 242 claims.
Those are, if I am understanding things correctly, that VCZ seems to have issues with:
1. The 242 claims are weak but being used to foreclose the whole of the APE transaction in its entirety.
2. Even if -these- particular claims in relation to the corporate action itself are weak grounds for an APE transaction we don't know with certainty what other claims could exist that are being foreclosed on.
That is what is being seen as sus. This is being stretched extra wide because AAron (where is A-Aron) doesn't want another fight on this matter.
Thanks for explaining things to me! I know very little about law. In regards to knowing with certainty what other claims may exist, are the settlement parties really expected to boil the ocean and speculate on all potential claims and explain why the claims would not have merit? That does not seem feasible. Even expecting them to leave the door open to any and all claims by excluding APE holders from the release seems unreasonable. Leaving the door open could impede their ability to proceed with the approved shareholder proposals indefinitely. At what point should the company be allowed to move forward with their business?
They have $75m in insurance for this time period and companies have potential claims all the time for all sorts of things. I don't see how not having APE claims in the scope of the release in this case this would impede their ability in any meaningful way.
Tbh I really don't know a whole lot myself. I am not a professional like Chance. I just happen to be really good and bullheadedly determined to pound pavement on things like this. So I wouldn't take everything I say completely as gospel, but I do try.
As to the first question, they wouldn't have to speculate on those claims if they hadn't cast such a wide net in the first place. If they had said any claims of common shareholders arising out of the APE transactions that would have been less of a reach and more acceptable in the court's eyes, again assuming there is a concern that has yet to be seen. Instead they are trying to enjoin the potential claims of another class of shareholders that aren't party to these proceedings.
As to the second question aside from what Chance has already has replied with, are we not forgetting the rights of the shareholder to be secure in their investment and their claims to the company if they feel wronged. Sure AMC has a right to do business, but not in a way that abuses its owners, wither that be all classes as a whole or individual classes or series of them. The court sees the right to sue as an inherent right of a shareholder and using one class of shares to enjoin and foreclose another class of shareholders from exercising their rights is a pretty scummy tactic.
Hm. Your explanation makes sense to me, but the situation seems suboptimal and confusing for every party. It seems like there should be a statutory period for claims to be made by everyone with a bone in the game. They should be addressed by the company. Then the company should be able to proceed. As it stands, a subset of shareholders made some claims. They’ve been addressed to an extent. The company is trying to move forward, but technically, they can’t try to close the door on additional claims. So their best option would have been to pursue release of only the claims addressed by the settlement and then hurry through all the next steps before anyone else could file against them?
Thank you for your reflections on the case! About the released claims being overly broad by including any that APE holders may bring, would the broadness really be an issue considering no APE holders objected to the settlement (AFAIK)? I know they may not have qualified to be objectors if they were not AMC holders, but dubious qualifications didn’t seem to stop others from submitting objections.
Because they were not part of the class, they did not legally have standing to object to the settlement purely on that basis, and in large part Izzo’s objection was qua her APE holdership although she was a dual holder, so it’s a very strange situation.
Moreover, it’s a due process issue, so it doesn’t require an objection to be a valid concern.
Is the due process issue really a concern here that the court actually needs to consider?
If someone were to sue, first the company would need to raise the release to even be an issue and then a court could decide then if due process would be violated if the release is upheld there.
Like no real reason the court needs to decide that now.
Due process is always an issue for the Court to consider as a fiduciary under Rule 23.
Thank you for the thoughtful summary.
As a non-legal educated engineer, thank you for the lengthy, but well laid out synopsis. I can't say that I understand this anymore than from where we started, but one take away that stood out (thank you), was the Twinklevoss analogy. As a dual holder of a large number of shares (some since 2019), I find arbitrage of APE against a holder of the stock being equal is ludicrous. Again, thanks for the cynical, twilight zone profane take on this crazy episode in American Corporate law! I can't say that the 22,000 words were all enjoyable to read (but I get the same on engineering test flight notes I make). You definitely make law a funny, yet palpable subject for one who is not versed in its finer points! Bravo!
1. I tried organizing my thoughts on this case and the arb situation by writing about it and it easily took several hours, and that's without any of the expertise, prose, and nuance you bring to your writing. To have written all of this in a day - that's just crazy. Brava!
2. As someone who thought that Ghost Penciling was one of the more likely outcomes for the case, prior to you publishing this, I have a lot to read up on and think about... oh boy
3. I'm sure I speak for many of your readers that we know exactly how it feels to get sudden epiphanies on words we formerly didn't properly understand! Happened to me many times on my second read through haha
This was an absolute delight to read.
Curious about how we'll learn about the Court's ruling? I know once it's ready, the written opinion will be filed in the docket and posted on the Court's website. But what I'm most curious about is when exactly it will be accessible to the general public and whether there's any way to gain early access to it. This is crucial, especially considering the likely immediate impact on stock prices.
The Court is very aware of this dynamic has made clear that they are not going to make any preferential access available: when it's posted on the docket, it will be posted to the website and thus made available to the general public.
Thanks, Chance!
Now that I have your attention, would you say it is safe to assume that it will be posted on the docket and the website simultaneously? I am asking because accessing the docket often involves a considerable delay for many of us.
It will be on the public docket potentially substantially later than it will be on the website. It will be on the internal docket (to the parties) essentially simultaneous with being posted to the website. The website is the place to be.
It was the best of times, it was the blurst of times… doh
I got to the word “grok” and have to go play skateboards now BRB99.1whfs
What a fun (and a bit confusing) read!
Each time I start typing out my thoughts here, a twist in each thought comes up. The case is obviously complex and hard to constrain to simple words. Good job elaborating on the issues here.
Thanks!
Any insight as to time of day the decision will be released?
Em’ som’ mcdreamy paragraphs y’all got in air. Whooo we! I fe lik I cou’d pass da verbal part of the SAT after; battling through that royale’s memento following tenant and inception and ultimately finding transcendence at dunkirk (that’s a Christopher Nolan joke) 9/10 stars