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AMC Stock Update: Insights on Adam Aron's Investor Letter

AMC CEO emphasizes the need to raise equity capital for the company's survival.

In a recent letter to shareholders, CEO Adam Aron emphasized the critical importance of raising fresh equity for AMC Entertainment. This comes after a surprising ruling by Delaware's Chancery Court Vice Chancellor Morgan Zurn, which blocked the conversion of AMC Preferred Equity Units (APE) stock into AMC stock. The ruling went against the recommendation of Special Master Elise Amato and led to arbitrage traders shorting AMC stock based on their belief that the conversion would proceed.

AMC had proposed a deal that would have provided shareholders with $129 million in shares, but it was rejected due to concerns about settling potential claims made by preferred shareholders. The court filing argued that awarding more shares to common stockholders would harm preferred unitholders and lacked proper consideration.

Following the court's decision, CEO Adam Aron sent a letter to investors emphasizing the urgency of raising equity capital for the company. This need has been further heightened by the joint writers' and actors' strike, which could potentially delay movie releases scheduled for 2024 and 2025. Aron revealed that AMC had submitted an updated plan to the Chancery Court and expressed hope that the court would approve the proposals from the last stockholder vote as soon as possible.

The tone of Aron's letter conveyed concern about the potential cash shortage that AMC could face by 2024 or 2025 if it fails to raise equity capital. He drew attention to the bankruptcy of Regal Cinemas and its parent company Cineworld, which had a devastating impact on shareholders. Aron stressed the need to mitigate bankruptcy risk and stated that raising equity capital is the wisest way to do so.

In an attempt to reassure shareholders, Aron disclosed that he is AMC's largest retail shareholder, holding over 8.3 million AMC shares or APE units. He emphasized that he has not sold any AMC or APE shares in over a year and a half and has no plans to sell in the near future. Aron's goal is to remove bankruptcy risk from the equation, and he believes that AMC's ability to raise equity capital when needed is crucial in achieving this.

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