(CTN News) – It isto note that the shares of movie theater chain AMC Entertainment Holdings, Inc. -AMC-36.0%+ Free Alerts were slumping during premarket trading on Monday morning.
There has been a downward movement in the shares of the company in reaction to the ruling by the Delaware Chancery Court on Friday that the company has the right to increase the number of authorized shares as well as reverse split the shares in the ratio of 1-for-10 in the next few weeks.
It will now be possible to convert all outstanding preferred shares of AMC, coded APE, into common shares of AMC once they have been converted into preferred shares.
Historically, 72% of shareholders and 91% of APE unit holders have voted in favor of these proposals, with a majority of shareholders voting in favor.
CEO Adam Aron commented on the development, saying that the court’s decision allows to raise additional equity capital, which can be used for the company’s ongoing cash reserves, debt repayment, and growth initiatives as well as to increase its cash reserves.
It is our expectation and hope that, with the convergence of the common shares of AMC and the APE units, we will be able to raise equity capital more efficiently and with less dilution than if the APE units were traded separately at a significant discount to the common shares of AMC”, Aron stated.
Dilution of equity capital can have a negative effect on the price of a stock, as it will increase the supply of shares and in turn lower the price of the stock as a result.
On Tuesday, AMC shares traded as low as $3.82 in premarket trading, a decrease of 27.38% from the previous day, according to data compiled by Benzinga Pro.
In the same period, the preferred unit of APE rose by 26.40% to $2.25, making it the highest preferred unit in history.