I normally say in my videos that reality is undefeated when talking about wild retail investing conspiracy theories. Apparently I need to change that slogan to Chance is undefeated.
Thanks Chance - absolutely nailed it with your analysis that the scope of the release (extending to APEs) seemed overly broad.
Does § 211 still seem like a viable path to conversion via 242(d), or does this opinion change things? I wouldn’t imagine it would since conversion via the ruling and conversion via § 211 seem like separate pathways, but then again, I’m not the expert here:
We are so fortunate Chance to have your insight on this journey. Having read your detailed thoughts I’m not particularly shocked by this decision (albeit it doesn’t suit me). Can’t say the same for twitter who are drowning in confusion.
In my personal notes, two weeks ago, I noted based on what Chance said that the settlement would be rejected due to the scope being too wide and assumed that she would allow them to modify without new notice.
Obviously, I am not entirely clear here as to what in fact she is allowing here going forward (i.e. if they can modify without new notice) but I suspect that is what in fact she may have allowed.
In any case, this knowledge had informed my investment decisions and has helped me avoid jumping on the shorting train (i.e. Cost to Borrow had gone up a lot recently indicating increasing demand to short) in anticipation of imminent approval as apparently so many assumed.
Does AMC still have the chance to come back with a different settlement? Sounds like she got issues with the release of APE and some other things like you said. That can be fixed right?
Some thoughts having read the decision. My comments relate only to the option of persisting with the Settlement (I don’t address 242 options etc). Apols if much of what follows is blindingly obvious or rambling.
And, full disclosure, I’m in favour of conversion and RS, so no doubt bias creeps in!
1. If parties want to get an approved settlement they need to exclude the preferred shares from the Release. See pages 4, 7, 37, 49.
2. It is not realistically open for plaintiffs to try to now represent the preferreds and achieve a release of APE claims. Nor is it a solution to fix the APE’s claims issue by offering consideration to the preferreds.
While the decision does refer to the absence of consideration for APEs claims (p55 and others) this is in practice secondary to the fundamental finding that “the class of common shareholders can’t release APE claims” (page 51 and elsewhere)
3. Zurn is reasonably clear that if the parties were prepared to agree to leave APE claims behind the Settlement could be approved. P60 -
“It is up to the parties to decide if the risk of unreleased APE claims is worth rejection of a settlement that MIGHT pave the way for the Conversion.”
4. Would parties (AMC primarily) be prepared to proceed on the basis of potential APE claims not being released?
I don’t know, would welcome thoughts from others. Some observations though...
5. Perhaps they would...
a) there is real commercial and urgent (we are told) need to get a solution
b) the lawyers struggled in court to articulate a solid claim APES could bring. (Absolutely not suggesting though they couldnt)
c) some suggestion the counsel didn’t see it as the biggest point, just a very sloppy overreach. As per Zurn (page 59) the plaintiff counsel “wondered aloud if defendants would drop that part [APE claims] of the Release.”
d) if no litigation/injunction was ever brought AMC would have been living with this APE claim risk anyway
6. How quickly could a settlement be reached if parties (AMC primarily) were amenable to leaving APE claims behind?
I simply have to defer to Chance on this. But perhaps some observations around Zurn’s “sentiments” expressed in the decision (and take these with a pinch of salt as I know nothing of the actual process involved!)
a) In numerous places Zurn alluded to urgency. Eg page 34 “in an attempt to accommodate parties repeated request for expeditious resolution..”. Also page 4.
b) her last line suggests she is open to parties progressing matters and wasn’t prescriptive (p.68)
“The parties should confer and submit a schedule for the remainder of the case...”
c) while not Zurn’s concern the share price volatility might be at least noticed
d) as a general comment, I disagree hugely with those saying Zurn has been too slow in issuing the decision. She has a lot going on. I think she has shown urgency at every turn.
e) to my eye any necessary amendments to the Release are very straightforward. Zurn pretty much highlighted the offending language on page 37
One query I have , in relation to (b) above. Again I’ll defer to Chance l/others on what is meant by the phrase that follows the request for parties to confer and revert. Zurn goes on to write
“and the plaintiffs should file a consolidated compaint”
I understand why a response should be consolidated from Zurn’s perspective, just not sure why it is characterised as a “complaint.” Maybe just the correct description to a response to a decision?
7. Another timing observation. Zurn makes the point at page 57 that no-one raised the APE claim release in the objections as a “fault in the settlement”. Again, a question for others/Chance - might this be helpful (or maybe unhelpful) in allowing Zurn determine re- notice is not required?
8. Finally, another question.
On page 5 Zurn explicitly “dismisses”..”the various exceptions to the special master’s report. “
However, on page 66, having discussed the exceptions in a little detail, Zurn writes “The pending exceptions do not inform the basis for my opinion so I do not reach them. “
Not sure I fully understand this comment. Is it just standard process language or is Zurn actually reserving her position on the Objections notwithstanding having dismissed them on page 5?
It is helpful though that she explicitly dismissed any objections that the special master “could not have considered all the compliant objections.
Thanks again Chance for all your insights. No doubt you are holed up analysing things from every angle, so, while I mention welcoming your thoughts in various parts above, I don’t in fact expect you to have any time to! It’s more my way of saying I’m not an expert!
I was also very confused by what you raised on (8). At the end she says the exceptions aren't really relevant given the APE claim is enough to make a decision but it looks from the start that those exceptions would be dismissed anyway.
So it appears to me that she would be OK with this going through if they just drop the APE claims but I'm not sure about process here. Think it would be possible to waive the notice period (nothing really changes for the class members) but assume we would still need to go through special master report/new objections could be raised/etc?
You definitely were in the right here that the scope of the release was not going to be something that the court would be comfortable with. After reading the opinion I admit I am at a loss where things go from here.
Page 60 notes: "It is up to the parties to decide if risk of the unreleased APE claims is worth rejection of a settlement that might pave the way for the Conversion, which the parties have intimated is necessary to save the Company from financial ruin."
The conclusion notes the settlement is not approved.
As a nonlawyer I do wonder does this mean that VC Zurn is open to them resubmitting the settlement without the APE release and then she will consider approving without 60 day notice and further objections? What else could the wording on page 60 mean. Why would she have even given any effort to the rest here if this is in-fact a rejection and she is requiring notice should they resubmit the settlement?
In her analysis she does in one of those footnotes recognize that a majority of shares voting, voted yes, but not a majority of shares actually voted, ignoring the mirror-voting of APE. Definitely she is well aware that a new vote after 8/1 would likely pass, making this whole case mostly meaningless if this does mean she intends to delay things here a few more months. A serious look at the company's financials and projected box office revenues once you get beyond the current blockbuster releases is not a pretty picture. Waiting till late Sep or Oct to do conversion is likely too late for the company to raise funds.
My guess is ultimately VC Zurn agrees to a modified settlement without further notice or if she refuses to then she is tactically acknowledging that the company will go ahead with a new vote and do this all outside of court under the amended law. Maybe, ultimately that is what she wants. She gets to avoid being the one to rule on the case and being blamed for the fallout and the "apes" can seal their own doom with however they vote in August.
I am sure your full article on this will consider all this and more so will wait to see what you have to say. Not expecting a detailed response here. Just venting my thoughts.
Thinking this all over... Without the APE release any settlement will be met with a class action by some APEs (tell me Izzo's lawyer does not have one ready to go) that the settlement unjustly impacts APE shareholders and should be stayed.
No shareholder of only APE would file such a suit, but rather such a suit would be filed by an AMC shareholder like Izzo who holds APE also, because Izzo does not want conversion. Hence without that release, the above I think is near certain.
In any case... Basically to me this all means that the company has no choice but to hold a new vote under the new law as other than going through an injunction hearing and winning (i.e. no settlement) they have no path through the courthouse now to get conversion timely.
Of course, I probably got this all wrong, but I like speculating on the outcome here.
Good thoughts....I don't know why AMC at this point would want to be further subjected to the whims and timeline of Zurn. She rejected it after a multi-month cluster following an agreed settlement, which followed a complaint which followed a perfectly legal shareholder vote (even if some didn't like it). So if (big if) they could file Monday for a shareholder meeting/vote (which by definition would be after 8/1) why wouldn't they just control their own destiny that way. What would that be....a vote for reverse split of both AMC and APE, but no conversion, which would free up massive $AMC for and ATM offering? Put language in proxy about financial ruin if the vote fails. Of course, everyone will run back to the court which seems to be sympathetic to the apes, and not sympathetic to the company that is trying to survive.
A reverse split of AMC that frees up sufficient shares automatically allows for conversion. A vote for a reverse split of AMC that will not provide sufficient headway for conversion would be at risk of failing as APE holders, with their mirror-voting, would possibly vote against that.
In any case, I need to see Chance's analysis of this to better understand the valid legal path forward as opposed to my own uneducated speculation.
Thanks. A 1-10 of both AMC and APE, which I think is what was already on the table, would provide more than enough for conversion and their wildest dreams of an ATM. They have about 524m authorized. the 517m outstanding become 51.7m, leaving 427m remaining. The Ape conversion only needs about 100m (after the r/s). So they would have over 300m available (on at stock that in the after-hours would be a $70 post split stock - yeah, i know it wouldn't stay there but anyway...) $70*300m is $21 billion.
What are the parties’ options for moving forward? Would they simply pare down the scope of release and resubmit the same settlement deal? The ruling didn’t seem to provide any guidance on what they need to do to get the status quo order lifted.
I don't see anything in Zurn's opinion precluding the parties from offering a new settlement agreement with a compliant release. In addition to only releasing claims held by the common, however, they may hav to revise the form of the settlement so as to not adversely affect the preferred.
A board of directors has fiduciary duties to preferred stock. A contract that purports to allow/require a fiduciary to act inconsistently with his fiduciary duties is void as against public policy. So there's an argument that a settlement that favors the common over the preferred is void.
DaPrawf, I do not follow your logic as to why you think Zurn would like to see the settlement not be adverse to the preferred. My understanding was that she was just noting that even if the APE release were proper, the fact that the settlement is adverse to the APEs would mean there is no consideration for the release. But if the APE release is removed, then there should be no need for APE consideration, and therefore the settlement's adversity to preferred is moot.
Every case where a single class is getting a benefit whether via litigation or a settlement is ultimately hurting the other classes. This cannot be a reason to reject a settlement by itself. Just would not make a whole lot of sense.
If you read Trados, you'll see that “Preferred stockholders are owed fiduciary duties only when they do not invoke their special contractual rights and rely on a right shared equally with the common stock.” Under those circumstances, “the existence of such right and the correlative duty may be measured by equitable as well as legal standards.”For example, just as common stockholders can challenge a disproportionate allocation of merger consideration, so too can preferred stockholders who do not possess and are not limited by a contractual entitlement. Although there is an anti-dilution provision in the certificate of designation for the APEs, it's not obvious on the face of the certificate that that provision speaks to the type of dilution that is at issue in the settlement. Hence, there is a plausible argument to made that the contract doe not define and delimit the preferred's rights w/r/t the settlement.
If you keep reading Trados, you’ll see that it says: “It is the duty of directors to pursue the best interests of the corporation and its common stockholders, if that can be done faithfully with the contractual promises owed to the preferred. … Put differently, ―generally it will be the duty of the board, where discretionary judgment is to be exercised, to prefer the interests of the common stock—as the good- faith judgment of the board sees them to be—to the interests created by the special rights, preferences, etc. . . . of preferred stock.”
Ha I’m with you. It seems like the judge has to ignore the practical reality of this specific situation (e.g., APE holders are more harmed by not approving the settlement than by approving it, though it dilutes them) just so she can apply all these frameworks and precedents that people came up with for other situations.
It also seems to completely ignore the fact that APE diluted AMC in the first instance, as if AMC means nothing and a corporate Board can just snatch your candy and then get the courts approval for that theft
If you want to share some thoughts on Live tonight drop me a note. Going to start around 7PM CST and will probably chat and answer questions for a few hours if you want to drop in.
Chance, I know you wrote a long post on 242(d).....which are sometimes hard to follow....because I am not a lawyer, but now that we have the rejection, let me ask simply.......Under 242(d) can AMC announce a shareholder vote to effect a reverse stock split of both AMC and APE, with all votes being tallied as a single class (which would obviously pass as APE has 2x the shares outstanding and the bar is only a majority of the votes cast, not a majority of the votes outstanding)? This would free up massive headroom in available shares, and the company could start funding itself using AMC instead of APE.....which was the only goal all along. If yes, this would seem to be Adam Aron's next move (unless otherwise still bound by the court?)
AMC might try to solve the Gordian knot by having a revote using the new statute and waiving the provision under which uninstructed #APES shares are voted the same way as instructed shares (can they do that? not sure). But I assume that the status quo order precludes that.
This is where things get really interesting. Delaware law requires that a company hold an annual meeting not less than 13 months after the date of the last meeting. #AMC held its last annual meeting on 6/16/22, so the 13 month deadline has passed. On Monday, a shareholder sued seeking an order to compel $AMC to hold the meeting.
So AMC might go to Zurn and say "if the status quo order precludes us from having an annual meeting, you have to lift it to let us do so. And why not let us take a new vote at the same time?" Might work.
Does the status quo preclude that?! Seems a bit much.
As to changing the voting provision... Umm... not going to happen. This is in the SEC registration documents for how the shares get to vote. AMC has zero ability to change that on its own.
I normally say in my videos that reality is undefeated when talking about wild retail investing conspiracy theories. Apparently I need to change that slogan to Chance is undefeated.
Thanks Chance - absolutely nailed it with your analysis that the scope of the release (extending to APEs) seemed overly broad.
Does § 211 still seem like a viable path to conversion via 242(d), or does this opinion change things? I wouldn’t imagine it would since conversion via the ruling and conversion via § 211 seem like separate pathways, but then again, I’m not the expert here:
We are so fortunate Chance to have your insight on this journey. Having read your detailed thoughts I’m not particularly shocked by this decision (albeit it doesn’t suit me). Can’t say the same for twitter who are drowning in confusion.
Agree!
In my personal notes, two weeks ago, I noted based on what Chance said that the settlement would be rejected due to the scope being too wide and assumed that she would allow them to modify without new notice.
Obviously, I am not entirely clear here as to what in fact she is allowing here going forward (i.e. if they can modify without new notice) but I suspect that is what in fact she may have allowed.
In any case, this knowledge had informed my investment decisions and has helped me avoid jumping on the shorting train (i.e. Cost to Borrow had gone up a lot recently indicating increasing demand to short) in anticipation of imminent approval as apparently so many assumed.
Was there another document issued by the Court beyond the opinion that might have addressed the question of what will be allowed?
Does AMC still have the chance to come back with a different settlement? Sounds like she got issues with the release of APE and some other things like you said. That can be fixed right?
Every damn day I get more and more impressed and awestruck at the ability and talent of the DCoC. Zurn FTW! #DiamondHands
Some thoughts having read the decision. My comments relate only to the option of persisting with the Settlement (I don’t address 242 options etc). Apols if much of what follows is blindingly obvious or rambling.
And, full disclosure, I’m in favour of conversion and RS, so no doubt bias creeps in!
1. If parties want to get an approved settlement they need to exclude the preferred shares from the Release. See pages 4, 7, 37, 49.
2. It is not realistically open for plaintiffs to try to now represent the preferreds and achieve a release of APE claims. Nor is it a solution to fix the APE’s claims issue by offering consideration to the preferreds.
While the decision does refer to the absence of consideration for APEs claims (p55 and others) this is in practice secondary to the fundamental finding that “the class of common shareholders can’t release APE claims” (page 51 and elsewhere)
3. Zurn is reasonably clear that if the parties were prepared to agree to leave APE claims behind the Settlement could be approved. P60 -
“It is up to the parties to decide if the risk of unreleased APE claims is worth rejection of a settlement that MIGHT pave the way for the Conversion.”
4. Would parties (AMC primarily) be prepared to proceed on the basis of potential APE claims not being released?
I don’t know, would welcome thoughts from others. Some observations though...
5. Perhaps they would...
a) there is real commercial and urgent (we are told) need to get a solution
b) the lawyers struggled in court to articulate a solid claim APES could bring. (Absolutely not suggesting though they couldnt)
c) some suggestion the counsel didn’t see it as the biggest point, just a very sloppy overreach. As per Zurn (page 59) the plaintiff counsel “wondered aloud if defendants would drop that part [APE claims] of the Release.”
d) if no litigation/injunction was ever brought AMC would have been living with this APE claim risk anyway
6. How quickly could a settlement be reached if parties (AMC primarily) were amenable to leaving APE claims behind?
I simply have to defer to Chance on this. But perhaps some observations around Zurn’s “sentiments” expressed in the decision (and take these with a pinch of salt as I know nothing of the actual process involved!)
a) In numerous places Zurn alluded to urgency. Eg page 34 “in an attempt to accommodate parties repeated request for expeditious resolution..”. Also page 4.
b) her last line suggests she is open to parties progressing matters and wasn’t prescriptive (p.68)
“The parties should confer and submit a schedule for the remainder of the case...”
c) while not Zurn’s concern the share price volatility might be at least noticed
d) as a general comment, I disagree hugely with those saying Zurn has been too slow in issuing the decision. She has a lot going on. I think she has shown urgency at every turn.
e) to my eye any necessary amendments to the Release are very straightforward. Zurn pretty much highlighted the offending language on page 37
One query I have , in relation to (b) above. Again I’ll defer to Chance l/others on what is meant by the phrase that follows the request for parties to confer and revert. Zurn goes on to write
“and the plaintiffs should file a consolidated compaint”
I understand why a response should be consolidated from Zurn’s perspective, just not sure why it is characterised as a “complaint.” Maybe just the correct description to a response to a decision?
7. Another timing observation. Zurn makes the point at page 57 that no-one raised the APE claim release in the objections as a “fault in the settlement”. Again, a question for others/Chance - might this be helpful (or maybe unhelpful) in allowing Zurn determine re- notice is not required?
8. Finally, another question.
On page 5 Zurn explicitly “dismisses”..”the various exceptions to the special master’s report. “
However, on page 66, having discussed the exceptions in a little detail, Zurn writes “The pending exceptions do not inform the basis for my opinion so I do not reach them. “
Not sure I fully understand this comment. Is it just standard process language or is Zurn actually reserving her position on the Objections notwithstanding having dismissed them on page 5?
It is helpful though that she explicitly dismissed any objections that the special master “could not have considered all the compliant objections.
Thanks again Chance for all your insights. No doubt you are holed up analysing things from every angle, so, while I mention welcoming your thoughts in various parts above, I don’t in fact expect you to have any time to! It’s more my way of saying I’m not an expert!
Thanks for this, great analysis
I was also very confused by what you raised on (8). At the end she says the exceptions aren't really relevant given the APE claim is enough to make a decision but it looks from the start that those exceptions would be dismissed anyway.
So it appears to me that she would be OK with this going through if they just drop the APE claims but I'm not sure about process here. Think it would be possible to waive the notice period (nothing really changes for the class members) but assume we would still need to go through special master report/new objections could be raised/etc?
You definitely were in the right here that the scope of the release was not going to be something that the court would be comfortable with. After reading the opinion I admit I am at a loss where things go from here.
Page 60 notes: "It is up to the parties to decide if risk of the unreleased APE claims is worth rejection of a settlement that might pave the way for the Conversion, which the parties have intimated is necessary to save the Company from financial ruin."
The conclusion notes the settlement is not approved.
As a nonlawyer I do wonder does this mean that VC Zurn is open to them resubmitting the settlement without the APE release and then she will consider approving without 60 day notice and further objections? What else could the wording on page 60 mean. Why would she have even given any effort to the rest here if this is in-fact a rejection and she is requiring notice should they resubmit the settlement?
In her analysis she does in one of those footnotes recognize that a majority of shares voting, voted yes, but not a majority of shares actually voted, ignoring the mirror-voting of APE. Definitely she is well aware that a new vote after 8/1 would likely pass, making this whole case mostly meaningless if this does mean she intends to delay things here a few more months. A serious look at the company's financials and projected box office revenues once you get beyond the current blockbuster releases is not a pretty picture. Waiting till late Sep or Oct to do conversion is likely too late for the company to raise funds.
My guess is ultimately VC Zurn agrees to a modified settlement without further notice or if she refuses to then she is tactically acknowledging that the company will go ahead with a new vote and do this all outside of court under the amended law. Maybe, ultimately that is what she wants. She gets to avoid being the one to rule on the case and being blamed for the fallout and the "apes" can seal their own doom with however they vote in August.
I am sure your full article on this will consider all this and more so will wait to see what you have to say. Not expecting a detailed response here. Just venting my thoughts.
Thinking this all over... Without the APE release any settlement will be met with a class action by some APEs (tell me Izzo's lawyer does not have one ready to go) that the settlement unjustly impacts APE shareholders and should be stayed.
No shareholder of only APE would file such a suit, but rather such a suit would be filed by an AMC shareholder like Izzo who holds APE also, because Izzo does not want conversion. Hence without that release, the above I think is near certain.
In any case... Basically to me this all means that the company has no choice but to hold a new vote under the new law as other than going through an injunction hearing and winning (i.e. no settlement) they have no path through the courthouse now to get conversion timely.
Of course, I probably got this all wrong, but I like speculating on the outcome here.
Good thoughts....I don't know why AMC at this point would want to be further subjected to the whims and timeline of Zurn. She rejected it after a multi-month cluster following an agreed settlement, which followed a complaint which followed a perfectly legal shareholder vote (even if some didn't like it). So if (big if) they could file Monday for a shareholder meeting/vote (which by definition would be after 8/1) why wouldn't they just control their own destiny that way. What would that be....a vote for reverse split of both AMC and APE, but no conversion, which would free up massive $AMC for and ATM offering? Put language in proxy about financial ruin if the vote fails. Of course, everyone will run back to the court which seems to be sympathetic to the apes, and not sympathetic to the company that is trying to survive.
A reverse split of AMC that frees up sufficient shares automatically allows for conversion. A vote for a reverse split of AMC that will not provide sufficient headway for conversion would be at risk of failing as APE holders, with their mirror-voting, would possibly vote against that.
In any case, I need to see Chance's analysis of this to better understand the valid legal path forward as opposed to my own uneducated speculation.
Thanks. A 1-10 of both AMC and APE, which I think is what was already on the table, would provide more than enough for conversion and their wildest dreams of an ATM. They have about 524m authorized. the 517m outstanding become 51.7m, leaving 427m remaining. The Ape conversion only needs about 100m (after the r/s). So they would have over 300m available (on at stock that in the after-hours would be a $70 post split stock - yeah, i know it wouldn't stay there but anyway...) $70*300m is $21 billion.
My Twitter thread on the settlement. I will be interested to see if Chance disagrees with me about what the release actually does. https://twitter.com/PrawfBainbridge/status/1682493057894350848
What are the parties’ options for moving forward? Would they simply pare down the scope of release and resubmit the same settlement deal? The ruling didn’t seem to provide any guidance on what they need to do to get the status quo order lifted.
I don't see anything in Zurn's opinion precluding the parties from offering a new settlement agreement with a compliant release. In addition to only releasing claims held by the common, however, they may hav to revise the form of the settlement so as to not adversely affect the preferred.
A board of directors has fiduciary duties to preferred stock. A contract that purports to allow/require a fiduciary to act inconsistently with his fiduciary duties is void as against public policy. So there's an argument that a settlement that favors the common over the preferred is void.
DaPrawf, I do not follow your logic as to why you think Zurn would like to see the settlement not be adverse to the preferred. My understanding was that she was just noting that even if the APE release were proper, the fact that the settlement is adverse to the APEs would mean there is no consideration for the release. But if the APE release is removed, then there should be no need for APE consideration, and therefore the settlement's adversity to preferred is moot.
Every case where a single class is getting a benefit whether via litigation or a settlement is ultimately hurting the other classes. This cannot be a reason to reject a settlement by itself. Just would not make a whole lot of sense.
Your second paragraph is flatly incorrect. See Trados.
If you read Trados, you'll see that “Preferred stockholders are owed fiduciary duties only when they do not invoke their special contractual rights and rely on a right shared equally with the common stock.” Under those circumstances, “the existence of such right and the correlative duty may be measured by equitable as well as legal standards.”For example, just as common stockholders can challenge a disproportionate allocation of merger consideration, so too can preferred stockholders who do not possess and are not limited by a contractual entitlement. Although there is an anti-dilution provision in the certificate of designation for the APEs, it's not obvious on the face of the certificate that that provision speaks to the type of dilution that is at issue in the settlement. Hence, there is a plausible argument to made that the contract doe not define and delimit the preferred's rights w/r/t the settlement.
If you keep reading Trados, you’ll see that it says: “It is the duty of directors to pursue the best interests of the corporation and its common stockholders, if that can be done faithfully with the contractual promises owed to the preferred. … Put differently, ―generally it will be the duty of the board, where discretionary judgment is to be exercised, to prefer the interests of the common stock—as the good- faith judgment of the board sees them to be—to the interests created by the special rights, preferences, etc. . . . of preferred stock.”
Corporate law makes no sense
Ha I’m with you. It seems like the judge has to ignore the practical reality of this specific situation (e.g., APE holders are more harmed by not approving the settlement than by approving it, though it dilutes them) just so she can apply all these frameworks and precedents that people came up with for other situations.
It also seems to completely ignore the fact that APE diluted AMC in the first instance, as if AMC means nothing and a corporate Board can just snatch your candy and then get the courts approval for that theft
Chance what’s to stop Allegheny from just removing the APE releases and VC Zurn then approving the settlement?
If you want to share some thoughts on Live tonight drop me a note. Going to start around 7PM CST and will probably chat and answer questions for a few hours if you want to drop in.
Chance, I know you wrote a long post on 242(d).....which are sometimes hard to follow....because I am not a lawyer, but now that we have the rejection, let me ask simply.......Under 242(d) can AMC announce a shareholder vote to effect a reverse stock split of both AMC and APE, with all votes being tallied as a single class (which would obviously pass as APE has 2x the shares outstanding and the bar is only a majority of the votes cast, not a majority of the votes outstanding)? This would free up massive headroom in available shares, and the company could start funding itself using AMC instead of APE.....which was the only goal all along. If yes, this would seem to be Adam Aron's next move (unless otherwise still bound by the court?)
AMC might try to solve the Gordian knot by having a revote using the new statute and waiving the provision under which uninstructed #APES shares are voted the same way as instructed shares (can they do that? not sure). But I assume that the status quo order precludes that.
This is where things get really interesting. Delaware law requires that a company hold an annual meeting not less than 13 months after the date of the last meeting. #AMC held its last annual meeting on 6/16/22, so the 13 month deadline has passed. On Monday, a shareholder sued seeking an order to compel $AMC to hold the meeting.
So AMC might go to Zurn and say "if the status quo order precludes us from having an annual meeting, you have to lift it to let us do so. And why not let us take a new vote at the same time?" Might work.
Does the status quo preclude that?! Seems a bit much.
As to changing the voting provision... Umm... not going to happen. This is in the SEC registration documents for how the shares get to vote. AMC has zero ability to change that on its own.
We should all encourage Chance to come back to Twitter. Her friends and fans there miss her.
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