AMC Entertainment (NYSE:AMC) shares surged 60% in premarket Monday after a U.S. court judge blocked a proposed settlement on the company’s stock that would allow the company to issue more shares.
The judge said on Friday that the deal can’t be approved as it would also settle potential claims by preferred shareholders who were not represented in the lawsuit. Some shareholders sued AMC earlier this year over how the company organized a shareholder vote on the plan.
AMC’s CEO Adam Aron said yesterday that the company has filed a revised petition for a stock conversion plan, therefore addressing the judge’s concerns.
"Yesterday we along with the plaintiffs, filed with the Delaware Court, a modification of the legal release surrounding the settlement of the Delaware litigation in an effort to address the Court's voiced concern," CEO Aron said in an open letter to investors.
He also noted in the letter that the company was burning cash at an unsustainable rate. If AMC can’t raise new capital, the management sees a high risk of the company running out of cash in the next year or two.