AMC’s APEs Have to Wait

You know the deal. AMC Entertainment Holdings Inc. had a meme stock that traded up a lot even as AMC’s business was struggling. AMC took advantage of this dynamic to sell a lot of stock — so much stock, in fact, that it ran out. Its corporate charter authorizes 524 million common shares, and by last summer it had issued essentially all of them.

The obvious solution was for AMC to ask its shareholders to vote to amend the charter and authorize more shares. In 2021, AMC did that, but then withdrew the proposal in the face of shareholder … well, I am not sure what to call it. “Shareholder opposition,” perhaps. “Shareholder indifference,” maybe. The point is that AMC needed to get a vote of a majority of all of its common shares to approve the charter amendment. There were two problems. One is that its shareholders are mostly individual retail investors, and retail investors tend not to vote much1; only about half of AMC’s shares voted at its last annual meeting. The other is that some of those investors really didn’t like the plan to issue more stock, worrying that it would dilute their ownership (or help out short sellers, or otherwise bring down the price of AMC stock). Those two problems are additive: AMC needed a majority of all of its shares to vote to authorize more shares; if 40% of its shareholders didn’t vote and another 20% voted no, then the proposal would fail. So AMC withdrew it.