Meme stock AMC jumps as investors cheer stock conversion plan halt (updated)

KOSS

24/07/2023 14:45

(Adds comments, data on short squeeze, updates prices)
    By Medha Singh
       July 24 (Reuters) - Shares of retail traders' favorite
AMC Entertainment Holdings  AMC.N  soared on Monday after a U.S.
court blocked the theater chain's stock conversion plan that
risked diluting investors' holdings.
    A Delaware court judge said on Friday declined to approve
the proposed settlement by AMC in a case that has alleged the
company planned to convert preferred stock to common to
circumvent the will of common stock holders who had opposed the
issuing of new shares.
    AMC had told investors it was burning cash at an
unsustainable rate and warned that an inability to raise capital
could force it into bankruptcy. It had suggested selling more
shares would enable it to pay down some of its $5.1 billion
debt.
    The company has filed a revised petition for the stock
conversion plan addressing the Delaware court's concerns, CEO
Adam Aron said on Sunday.    
    The highly shorted AMC common shares were the most traded
U.S. stocks at 9:41 a.m. ET, surging 21% to $5.33, while its
preferred shares, "APE", fell 3.7% to $1.73.
    "Right now there's a fantasy of full recovery in movie
theaters and as a result equity holders are happy they won't be
massively diluted by the conversion," said Thomas Hayes,
managing member of Great Hill Capital Llc in New York.
    In a win for theater chains globally, the much-hyped movies
"Barbie" and "Oppenheimer" drew large crowds after sluggish
ticket sales in June and July.
    The stock was trending on investor-focused social media
stocktwits.com, indicating retail traders' interest.
    With about 28% of AMC's publicly available shares under
short position, analytics firm Ortex expected a large part of
Monday's buy pressure to be generated by a short squeeze.
    The bearish investors stand to take a $270 million hit in
paper losses, Ortex said.
    "Trying to short AMC during a short squeeze is about as
smart as burning money," said Matthew Tuttle, chief executive
offier at Tuttle Capital Management, adding that there is "not
much juice left in the squeeze."
    Tuttle said he was looking at opportunities in stocks
gaining in sympathy with AMC, such as GameStop  GME.N  and other
shares with high short interest.
    GameStop  GME.N  rose 2.2%, Koss Corp  KOSS.O  climbed
17.7%, while Tupperware  TUP.N  added 58%.

 (Reporting by Medha Singh in Bengaluru; Editing by Krishna
Chandra Eluri and Shinjini Ganguli)
 ((Medha.Singh@thomsonreuters.com; +91 80 6210 0592; Twitter: https://twitter.com/medhasinghs;))