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Followers of AMC Entertainment (NYSE:AMC) are waiting until at least next week for a decision in the company’s stock-conversion settlement case, but B. Riley has weighed in with expectations for a positive outcome for the company.
A two-day hearing in Delaware’s Court of Chancery wrapped up at the end of last week, with Vice Chancellor Morgan Zurn set to rule on the validity of a settlement of a class action against AMC’s plan to convert its AMC Preferred Equity units (APE) to common shares in order to pursue new capital.
“While we acknowledge that the decision could go in either direction, we remain optimistic for a ruling in favor of the proposed settlement after a special master, who was appointed by the Court to provide an opinion on the settlement, issued a recommendation in favor of that settlement agreement,” analyst Eric Wold said.
And Zurn needs to go for a settlement of some kind to offer a “clearer path for AMC to push through the global exhibition industry recovery in the best position for shareholders,” given that AMC might only barely move into positive free cash flow on a full-year basis in 2024.
Wold has stated a belief that the prices of APE units (APE) and AMC common shares (AMC) should converge heading into a settlement approval — and what’s more, after that, “we believe there is more likely to be upward pressure on APE units as opposed to downward pressure on AMC common shares.” AMC, meanwhile, could see more upside opportunity after more factors come to light (chances for AMC to reduce total debt outstanding and pursue new growth to boost adjusted EBITDA).
He’s maintaining a Neutral rating on AMC common stock, but “could see a more attractive upward trading opportunity for APE units heading into that decision and immediately afterwards.”
On Wednesday coming off the July 4 trading holiday, AMC stock (AMC) is -2.6%, while APE units (APE) are -1.1%.
