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(Reuters) — AMC Entertainment Holdings Inc. shareholders have filed a lawsuit in Delaware accusing the movie theater chain of bypassing them in a bid to increase the number of shares.
Allegheny County Employees’ Retirement System said in the proposed class action filed on Monday that the company and several of its directors violated state law to “eviscerate” the voting power of common stockholders, who had not supported issuing new shares.
AMC shares closed up 16.4% on Tuesday.
AMC became a “meme stock” during the COVID-19 pandemic, raising more than $2 billion in 2021 as retail investors piled into its stock and others such as GameStop Corp., which shortsellers had bet against.
AMC last year created preferred shares, which trade on the New York Stock Exchange under the symbol APE.
The Pennsylvania pension fund said in the lawsuit that creation of the preferred stock was an attempt to circumvent shareholders’ will.
The company is poised to hold a shareholder vote in March that would convert preferred shares to common shares and authorize it to increase its common stock count tenfold.
The pension fund asked the Delaware Chancery Court to declare the preferred shares invalid and ban the holders of the preferred shares from voting.
Experts have told Reuters that since there are 1.8 preferred shares for every common share of AMC, preferred stock voting in favor of the conversion can easily outnumber common stock voting against the authorization for more common stock sales.