AMC Theaters: APE Preferred Share Unit Story and Timeline
Offering, Concept, Board’s Role, and Legal Proceedings
Last Updated: Sept 13, 2023
Timeline of Key Events
July 28, 2022 - Board Approval
After months of discussions, the AMC board approved the creation of AMC Preferred Equity Units (“APEs” or “APE units”).
August 4, 2022 - Official Announcement
AMC announced it would issue one APE as a special dividend for each share of Class A common stock outstanding as of the established record date.
Voting Rights Representation
AMC Theaters told shareholders that APEs had the same voting power as common shares (i.e., one vote each).
Important Disclosure Gap: AMC did not prominently disclose that pursuant to an August 4 deposit agreement (the “Deposit Agreement”), the Company’s transfer agent was required to vote uninstructed APEs proportionally with instructed APEs (Also known as “Mirror Voting”).
By contrast, shares of AMC common stock would only be voted if voting instructions were received.
August 4, 2022 - CEO Communication Campaign
Adam Aron, CEO of AMC Theaters, posted on X platform (formerly known as Twitter) to explain the APE issuance, claiming:
“TODAY WE POUNCE”
Continued Advocacy
Adam Aron continued to spread the message of APE issuance and advocated that it would be the savior of AMC Theater:
"#TodayWePounce"
This marketing campaign generated significant enthusiasm among investors who did not fully understand the APE issuance mechanics.
Open Letter Campaign
Adam Aron published an open letter on AMC Theater letterhead:
“…will be issuing an AMC Preferred Equity unit stock dividend, PAYABLE ONLY to holders of our 516,820,595 issued and outstanding common shares”
Critical Point: The word “dividend” implied that it would be free for each AMC common share owned.
Dividend Narrative
Adam Aron further emphasized in his letter that APE issuance satisfies the continued long-standing request from shareholders for a dividend distribution.
“For a variety of reasons, a dividend distribution in just about any form has been longstanding request from our investors base. Today we answered your call.”
Share Count Positioning
Adam Aron also portrayed the APE issuance as fulfilling the desperately needed “share count”:
“So, too, this issuance of 516,820,595 new APEs will essentially serve the same purpose as the much voiced request for a ‘share count’…”
Assumption Made: This positioning assumed APE would be issued as a free dividend. Under this scenario, brokers would be required to issue a dividend share for each common share, potentially exposing synthetic shares if they were widespread.
Critical Analysis: If truly a dividend with no dilution, the float could be counted through broker holdings.
Vague Stock Split Reference
Adam Aron then vaguely referenced that this issuance would be “similar” to a “2-for-1” stock split, without clearly stating this would be an actual stock split.
He mentioned that the combined value would be the total of both AMC and APE shares without clarifying the actual formula.
Analysis: Disguised Stock Split
The evidence presented in this timeline demonstrates that APE was structured as an actual stock split, disguised as a dividend.
Key Problematic Elements:
- “Dividend” Language - Marketing used dividend terminology to suggest free distribution
- Vague Stock Split Reference - No clear disclosure that this was equivalent to a stock split
- Mirror Voting Mechanism - Uninstructed APEs voted proportionally, potentially empowering entities that did not issue voting instructions
- Share Count Confusion - Marketing suggested this would solve the share count question, when it actually diluted the effective float
Share on Social Media
Share :
On July 28, 2022 After months of discussions, the AMC board approved the creation of AMC Preferred Equity Units (“APEs” or “APE units”).
On August 4, 2022 AMC announced it would issue one APE as a special dividend for each share of Class A common stock outstanding as of the established record date.
AMC Theaters (Company) told shareholders that APEs had the same voting power as common shares (i.e., one vote each).
AMC did not prominently disclose that pursuant to an August 4 deposit agreement (the “Deposit Agreement”), the Company’s transfer agent was required to vote uninstructed APEs proportionally with instructed APEs (Also known as Mirror Voting)
By contrast, the shares of AMC common stock would only be voted if voting instructions were received.
On Aug 4, 2022 Adam Aron, CEO of AMC Theaters, posted on X platform (formerly known as Twitter) to explain the APE issuance and claiming:
"TODAY WE POUNCE"
Adam Aron continued to spread the great news of #APE issuance and advocated that it is the savior of AMC Theater and claimed:
"#TodayWePounce"
This hyped a lot of investors who did not fully understand the #APE issuance story.
He also published an open letter with AMC Theater letterhead:
“…. will be issuing an AMC Preferred Equity unit stock dividend, PAYABLE ONLY to holders of our 516,820,595 issued and outstanding common shares”
The word 'dividend' implied that it would be free for each AMC common share owned.
.
Adam Aron, once again, highlighted in his letter that APE is a dividend and it satisfies the continued request from shareholders for the issuance of a dividend.
“For a variety of reasons, a dividend distribution in just about any form has been longstanding request from our investors base. Today we answered your call.”
Adam Aron also portrayed the APE issuance as the desperately needed share count assuming it is actually a dividend
“So, too, this issuance of 516,820,595 new APEs will essentially serve the same purpose as the much voiced request for a “share count”…”
This was on the assumption that it is free and a dividend. Therefore, you can actually count the outstanding shares in the various brokers because brokers have to issue a dividend share for each common share. If synthetics were widespread as claimed by investors, brokers and whoever holds synthetic will be discovered in the process.
Adam continues to state that it is a dividend and there is no dilution in the initial offering.
Then in the same letter, Adam Aron vaguely brings up that this is similar to a ‘2-for-1’ stock split. He did not clearly state this as a stock split.
Then he mentioned that the value will be the total value of both AMC share and APE share combined without clarifying the actual formula for this, what turns out to be, an actual stock split disguised as a dividend.
In line with our commitment to our valued shareholders, we are excited to announce that you will receive yet another complimentary NFT.
Continuation of the “Tweet Storm” …
Again, in this tweet, calling for: (1) 1-APE tax-free, and (2) a stock dividend implying that for many investors, it will be given with a zero-cost basis for each existing AMC common share.
Then he vaguely explanaed that the AMC share price will fall but APE will compensate without explicitly clarifying that this is actually a stock split as he continues to state it is “similar” to a stock split.
Adam Aron continues to clearly state that he has seen no evidence of synthetic shares in the market and claims that the APE will serve as a share count, even though it is technically a stock split. This is yet another confusing statement regarding how it is supposed to be a share count when you only split an existing share and do not provide a free dividend.
Adam Aron claimed that in 2013, shareholders approved the creation of APE. However, it’s important to note that the shareholder base in 2013 is not the same as the one that owned 85% of the company in 2020/2021. This could be seen as a clear attempt to mislead by referring to owners from 2013 as shareholders when we are now in 2022. Such a reference may be used to dismiss the votes of the current shareholders.
Adam Aron clearly indicated that APE is vital and will serve as a tool to raise cash, which strongly implies his intention to dilute APE.
Adam Aron continued to build hype among investors who may not have realized or fully understood the hidden agenda behind the issuance of APE
On the next day, August 6, 2022, Adam Aron posted several messages aiming to ‘Clean up the FUD’ (FUD: Fear, Uncertainty, and Doubt), as a significant number of investors were greatly confused about the true meaning of APE. Was it a dividend that would genuinely result in a share count, or a stock split that would evidently devalue the shareholders’ holdings?
In his remarks, he mentioned an approximately 50%-50% split but continued to insist on referring to it as a dividend.
Once again, an attempt was made to provide clarification to the perplexed investors regarding the APE issuance, emphasizing that the dilution in this case was considered a beneficial dilution.
There was yet another attempt to reassure investors that there would be no dilution until after August 22, only if the decision to dilute was made.
Once more, he emphasized that APE was a tool to raise capital, indicating that dilution was on the horizon.
Adam Aron continued to address what he referred to as FUD stemming from the board’s actions, as an increasing number of informed investors began to recognize his strategy of significant dilution through methods circumventing the shareholder vote. Additionally, he presented an inexplicable correlation, implying that the stock’s decline was correlated with a lack of dilution.
Once more, Adam Aron attempted to address the legitimate concerns raised by investors who felt they were being disadvantaged, asserting that his personal interests were aligned with theirs.
Adam Aron then referred to the concerns raised by educated investors who had begun to discern his plan as ‘garbage information’ and asserted that they were bots and spreading doubt.
One day before the official day, Adam Aron made an attempt to provide clarification about what was about to occur.
On August 22, 2022, APE officially started trading. The market response was catastrophic as many investors feared, despite what Adam Aron had said. #AMC common dropped from over $25 to less than $10, while APE also saw a decline after reaching $10 per APE.
On that day alone, all shareholders lost over 20% of their value when combining the values of #AMC common and #APE.
Since then, #AMC common has continued to trend downward, setting new lows, and APE has also experienced a downward trend.
Over the next week, as brokers added APE to investors’ accounts, investors began to realize that APE was a stock split from AMC with a price tag of about 40% of each AMC common stock.
This revelation came as a shock to investors because APE would now be diluted as if it were a portion of AMC. It was seen as a clear workaround of the AMC shareholders’ vote against dilution, which had failed to gain approval twice.
AMC’s market capitalization at the offering of APE was approximately 516,820,595 shares x $25, which equates to approximately $12.9 billion. The APE portion became approximately 40% of that, which is $12.9 billion x 40% = $5.16 billion.
APE effectively took away about $5.16 billion from AMC common shareholders’ value.
On September 26, 2022, AMC disclosed its intention to dilute 425 million APEs through a market offering. In the weeks that followed, APE continued to decline for various reasons and soon was trading below $1. Adam Aron continued to dilute APE and was able to raise only a minimal amount of capital out of the $5.16 billion taken out of #AMC common shareholders’ value.
Despite it becoming clear that the purpose of APE had failed, Adam Aron persisted with his plan and continued to defend the issuance of APE during the numerous onsite visits he made during that period.
On October 15, 2022, Adam Aron announced the payment of $106 million using the APE units. With the APE price trending downward, investors were furious, as they witnessed the $5.16 billion being seemingly flushed down the drain.
On December 19, 2022, Adam Aron posted about what he referred to as the ‘shameful Wall Street games’ being played against AMC.
On December 21, 2022, the board approved an amendment to seek shareholder votes for two significant proposals: (1) to increase the authorized number of shares of common stock to a number sufficient to permit the full conversion of APEs into common stock, and (2) to effect a 1-for-10 reverse stock split of AMC equity.
The board specifically discussed how the Deposit Agreement increased the likelihood that the Proposals would pass.
In the same meeting, the Antara deal was also approved.
Dec 22, 2022: The Antara Deal
The Antara deal encompasses the following key components:
The sale of #APE units at 66 cents each to Antara, amounting to $110 million. A $100 million debt-for-equity exchange. A guaranteed ‘Yes’ vote for the conversion of APE to AMC and a 10-to-1 reverse split.
At this point, many retail investors began to realize that APE was a complete disaster. It had taken approximately $5.16 billion but had only raised a mere $250 million to $400 million. It was deemed a resounding failure. Moreover, it had provided the board with the technical means to sell it at a very low price in exchange for ‘Yes’ votes, ultimately allowing the board to override the votes of AMC shareholders.
Securing the Yes votes:
On February 7, 2023, AMC issued the APE units for the Antara Transaction.
February 8, 2023, served as the record date for votes, making owners of shares on this date eligible to vote on the upcoming proposal.
On February 9, 2023, The Company (AMC) waived the Forward Purchase Agreement’s lock-up restrictions, permitting Antara to sell up to twenty-six million APEs. Technically, Antara Capital was locked up for only one day, solely for the purpose of recording the necessary number of votes.
According to the court documents, the board and Adam Aron implemented the following measures to ensure the passage of the new proposal:
(1) They changed the voting structure for APE to Mirror voting (uninstructed votes proportionally mirrored to instructed votes). (2) The voting structure for AMC common shares remained unchanged, where votes are only cast if instructions are received. (3) Antara was locked into voting ‘Yes,’ and as a result, all instructed votes would be ‘Yes’ votes in proportion.
It is imperative to realize that, according to the court documents, ‘The Proposals passed only because of the APEs’ mirrored voting feature and Antara’s promised APE Yes votes.’ The AMC board acknowledged this fact internally."
On February 14, 2023, the board scheduled the special meeting for the vote on March 14, 2023.
AMC disclosed that Antara holds 258,439,472 APE shares, representing 17.8% of all outstanding voting power (Total AMC+APE).
Antara’s ‘Yes’ vote, coupled with the mirror-voting feature, guaranteed that the proposals would pass.
On December 22, 2022, Adam Aron claimed that APE had worked exactly as intended, despite the loss of approximately $4.5 to $5 billion in shareholder value since the issuance of APE. He then justified his intention to convert APE into AMC, which, as we later learned, had been his plan since 2021 under what we now know as Project Popcorn.
It is also worthwhile to note that Adam Aron and insiders kept selling during that long discussions of the project popcorn between June to Dec 2021.
It is also worthwhile to note that Adam Aron and insiders continued to sell during the lengthy discussions of Project Popcorn, which spanned from June to December 2021.
Share :
Project Popcorn
Later in the timeline, retail investors became aware of Project Popcorn, which involved discussions between Citi (AMC lender) and the board. This project was designed to create APE with the intention of diluting AMC common shareholders and allowing time to establish a majority vote (by selling shares at low prices and altering the voting structure). All of these actions were aimed at enabling the board to secure the ‘Yes’ vote needed to dilute AMC common shareholders.
Mirror Voting for APE but not AMC
Less than 25% of AMC common shareholders (with 35% voter turnout) approved the reverse split. This equates to (25% x 35% = 8.75%), which is less than 9% of #AMC common shareholders who voted in favor of the reverse split.
However, due to changes made by the board and Adam Aron in the voting structure of APE, coupled with the deal with Antara, the proposal passed.
It’s essential to note that a majority of AMC common shareholders did not vote, and their absentee votes were not considered.
Conversely, although a majority of APE holders also did not vote, their absentees were counted as ‘Yes’ votes proportionally to the actual ‘Yes’ votes.
This voting scheme is known as the Mirror voting scheme, which was the sole reason the board secured the ‘Yes’ vote.
It was evident that deliberate actions were taken by the board and Adam Aron to shift voting power away from AMC common shareholders. This shift in power was achieved by selling the APE units to Antara and guaranteeing a ‘YES’ vote to pass. This maneuver empowered the board to dilute an additional 5 billion shares.
The court settlement approval letter clarified that the creation of APE and the Antara deal were orchestrated with the aim of circumventing the shareholders’ vote.
The Lawsuit
On February 20th, 2023, Allegheny County Employees’ Retirement System (“Allegheny”) filed a class-action lawsuit.
The lawsuit alleged: (1) One count of breach of fiduciary duty and (2) a second count for violation of 8 Del. C. § 242.51 (which was dismissed).
On the same day, Anthony Franchi (together with Allegheny, “Plaintiffs”) filed a complaint with one count for breach of fiduciary duty.
This lawsuit claimed the obvious, which was that the issuance of APE units diluted the common stock’s voting rights and economic value.
AMC (defendent) claimed that AMC was “[l]eft without any other way to raise equity capital.”
Both plaintiff and defendant parties contended that an April 2023 injunction against the Proposals and the Conversion would cause significant financial harm to AMC.
The plaintiff changed their mind about the impact of not approving the reverse split and the merger of APE into AMC common on AMC’s demise. When questioned by the judge about the change in opinion, the plaintiff couldn’t provide any specific reasons.
AMC continued to pressure the judge for an accelerated approval to ensure that the reverse split and merger would occur before the fall. Otherwise, AMC would be at risk of bankruptcy."
On February 27, 2023, the court entered a status quo order that allowed AMC to hold the special meeting to seek votes but prohibited the execution of the reverse split and merge.
On March 7, 2023, Adam Aron posted that he had contacted FINRA and NYSE regarding the substantial amount of FTD (Failed-To-Deliver) and that AMC had been on the threshold list for over 3 weeks. Shareholders claim that Adam Aron never did enough to expose what they believe is blatant stock manipulation.
On March 8, 2023, Adam Aron posted encouraging shareholders to vote, even though the shareholder vote had no value due to the completed Antara deal and the mirror voting structure of APE.
By March 13, 2023, both lawsuits merged into one, led by Allegheny.
On March 14, 2023, AMC’s board, led by Adam Aron, staged a clear vote with an already engineered result. The two measures passed with a claimed 87% approval rate after (1) the Antara deal and (2) the Mirror voting scheme on APE.
The court documents detail the real percentages of votes, resulting in less than 9% of the total AMC common shareholders approving both proposals. The 9% is computed from the 24.8% who voted Yes out of the 35.23% who voted from all AMC common shareholders (24.8% x 35.23% = 0.087%).
The mirror voting for APE and the cheap sale of APE to Antara are the only reasons why this vote passed, according to the court documents and the admission of the board members.
On March 14, 2023, Adam Aron posted that 87% of voters said Yes to the proposals. Shareholders were amused by how the voting was conducted and how APE was used as a tool to secure the Yes vote.
On April 2, 2023, the Plaintiffs and defendant (AMC) reached a settlement to resolve the case. The next day, the Plaintiffs filed a motion to lift the status quo, allowing the reverse split and merge to take place as soon as possible and before shareholders were notified of the class action lawsuit. This condition was part of the settlement agreement.
This started to create doubts among educated AMC common shareholders that this class-action lawsuit was nothing more than a fabricated lawsuit meant to cover the board’s actions and legitimize their decisions, including the creation of APE, the changes in the vote structure, and the massive dilution that was about to occur.
Share :
On April 5, 2023, the Judge found that the parties had failed to make their case for implementing the proposed settlement before it was approved. Therefore, the status quo remained in effect.
On April 14, 2023, the Plaintiffs informed the Court that the parties had agreed to revised terms that were not conditioned on lifting the status quo order.
During this time, retail shareholders started to contact the court via phone, letters, and filings to weigh in on the case.
On April 16, 2023, Adam Aron posted assurances to shareholders who feared the reverse split’s impact. It was a very clear message assuring shareholders that the reverse split has no impact on the price, which turned out to be completely wrong. The days leading up to the reverse split were catastrophic for AMC, driving the price down to an all-time low of $1.4.
Adam Aron also tried to push the narrative that the 10-to-1 reverse split was approved by 87% of shareholders without any reference to the vote structure changes and Antara deal that guaranteed the Yes vote. Many investors considered this as misinformation.
On April 27, 2023, the judge asked for the filing of a stipulation of the settlement in which AMC would distribute 6,922,565 shares of common stock to existing common stockholders, one for each 7.5 shares owned. Any share fractions would be sold at market. If the settlement is approved, AMC common shareholders “would release all claims asserted in or relating to the allegations in the Allegheny complaint.”
The court set May 31 as the deadline for submitting objections and scheduled hearings for June 29 and 30. Over 3500 objection letters were submitted by the May 31 deadline.
Adversity Between AMC Common and APE Shareholders
Acknowledging the Strife: AMC Common Shareholders vs. APE Shareholders
On July 21, 2023, the judge denied the settlement, opening the door for a revised resolution.
The market response was very clear when the settlement was denied. AMC common spiked to almost 100% in the after-hours of July 21, 2023. This was a clear indication for many AMC common shareholders that the settlement, the reverse split, and the merger were not in favor of the share price.
On July 22, 2023, the plaintiff and defendant filed a revised settlement, just one day after the decision.
On July 23, 2023, Adam Aron posted an open letter (without AMC letterhead) that took AMC shareholders by surprise. The focus of the letter is that AMC needs to be able to raise capital by diluting the stock, and it is the only way to survive. The letter talks about bankruptcy and other companies that wiped out their shareholders and suggests that AMC management is much smarter and agile. It also addresses the concern that shareholders are afraid that their share value will depreciate due to this reverse split. Adam Aron attempts to convey his opinion that it is the opposite.
On Aug 2, 2023, Adam Aron mentioned the FTD and threshold list again and that he contacted FINRA and NYSE about it.
On Aug 6, 2023, Adam Aron again brought up the liquidity challenges in a move many shareholders interpreted as him intentionally capping the AMC common share value.
On August 11, 2023, Judge Zurn approved the revised settlement in the case. Additionally, she granted the plaintiff’s request for fees, which are estimated to be around $100 million.
On Aug 13, 2023, Adam Aron shared his thoughts in another open letter but with AMC letterhead.
Market Response
As a result of the declining stock price, shareholders who held AMC common stock experienced a significant loss in value. This loss may have left shareholders with only a fraction of their initial investment. Additionally, with the stock trading below $1 before the reverse split, it indicates that the company was facing financial challenges and potential delisting from the stock exchange. It is important to note that this information is based on the provided context, and for accurate and up-to-date information, it is advisable to refer to reliable financial sources or AMC’s official statements.
On the other hand, short interest went down to single digits and all FTDs were gone. All the data that was pointing to the short squeeze disappeared and it sounds as if the war is over.
Adam Aron went silent on X platform upon the extreme anger that AMC common shareholders have been experiencing as they have been warning him that this is not the right approach. As of the writing of this story, AMC trades at $0.788 (pre-reverse split).
Judge Zurn Document (denial) - July 21, 2023 - Resource of all text screenshots.
Judge Zurn Document (approval)- Aug 11, 2023 - Resource of all text screenshots.
Summary of the APE (AMC Entertainment Holdings, Inc.) lifecycle:
- July 28, 2022: Board approved APE (as a dividend but was actually a stock split).
- Aug 22, 2022: APE started trading on NYSE with about 40% of #AMC common value, with a price reaching about $10. APE dilution started.
- Dec 22, 2022: Board approved the Antara deal to buy $110M APE at $0.66 with a guaranteed vote of "Yes" for a reverse-split and merge of APE into AMC common.
- Feb 7, 2023: APE shares issued to Antara.
- Feb 8, 2023: Record date for votes on reverse split and APE merge into AMC.
- Feb 9, 2023: AMC waived the lock on APE for Antara, allowing them to sell.
- Feb 20, 2023: Lawsuit filed.
- March 14, 2023: Vote occurred with Mirror voting for APE but not for AMC. Less than 9% of AMC common holders voted "Yes." Yet, because of the mirror voting scheme and the Antara deal, the CEO claimed 87% said "Yes."
- July 21, 2023: Judge rejected the settlement, which spiked AMC common to almost 100% after-hours.
- July 23, 2023: Adam Aron posted a letter talking and stressing bankruptcy fears.
- Aug 11, 2023: Judge approved the revised settlement. AMC shares started in free fall, declining over 60% in a few days to an all-time low while APE stayed at its price.
- Aug 24, 2023: Last day of APE trading.
Current Status:
- AMC float shrank from ~1.5B (0.5B AMC common and ~1B APE) to about 150M (AMC and APE outstanding)
- Share price tanked to about $0.77 pre-split as of Sept 8, 2023
- The board took control of the vote and has about 4B shares (400M after reverse split) to dilute
- Most AMC common investors lost almost 99% of their shareholder value
- AMC bankruptcy is much higher probability due to:
- Investors lost faith in management
- Customers who are also investors also lost faith in the cause and in AMC
The story continues …
Share :