Dear Congressman,
I am writing to inform you of a great injustice done to the common shareholders of AMC Entertainment Inc.(AMC) that has culminated in a loss of $7.3 Billion in market cap and a 93% loss in price. A chain of events that should have never been allowed to be started by the NYSE as it has devastated the financial security of so many retail investors. Investors like myself, that had expectations for a fair market
In Q2 2021 AMC was able to raise $2.5 Billion in cash to help it sustain future net income losses as they were coming out of covid. This cash raise was precipitated by a large rise in AMC stock price correlated to an elevated number of retailers targeting companies that were heavily shorted as concluded in the SEC Staff Report on Equity and Options Market Structure Conditions in Early 2021 (see figure 3). The “meme” events resulted in AMC price increasing as much as $72. With these new elevated prices, AMC was able to raise money with the remaining shares they had approval for issuing. In essence, retailers saved the company by providing the conditions for AMC to raise a substantial amount of cash.
With so much cash on hand, AMC seeked to increase the total number of shares by 500 Million to a total of 1 Billion in a 2021 Annual Shareholder Meeting on May 4,2021 but then pulled the proposal. AMC then moved the 2021 Annual Shareholder Meeting to July 29th, 2021 and added a proposal to increase shares by 25 Million shares to 549 Million. Instead of putting these proposals to the vote, they decided to pull the vote. Adam Aron proclaimed they pulled it because there was split sentiment on this increase. But never put it to vote for the shareholders. No new proposal for share increase was proposed since.
Instead of seeking approval by the common shareholders for a share increase as a vehicle to raise cash, AMC devised a plan with Citigroup, called “Project Popcorn” that would allow them to issue a new class of shares on August 22nd, 2022 without shareholder approval. This new class was derived from 50 Million preferred shares, whereby AMC took 10 Million of the preferred shares and converted them to 1 billion AMC Preferred Equity Units (APE) (ie, share dilution). Each APE unit has the same voting power as 1 AMC common share (ie, voting dilution). At the time of APE issuance, AMC common shares were 516 million. The new APE class added 96% more voting shares without any shareholder approval. All this was justified by AMC with (1) a need for cash to avoid bankruptcy even though at the end of Q3 2022 (when APE was issued) AMC had $684 Million cash, and (2) by the failed share increase proposals in 2021 even though AMC never put it to vote. Some items to note:
So why undermine the shareholders by devising such a scheme to issue new shares without approval that would take away the common class’ voting power? It is the majority shareholders’ belief that AMC and its debt for equity lenders needed to restore voting power to friendly institutions and private equity companies
Moreover, why did the NYSE, which contains various Rules protecting shareholder voting, allow APE to be issued in the first place? And this is the reason why I am writing to you today. To ask Congress to, directly or indirectly through the SEC, investigate the NYSE’s approval to the issuance of APE that resulted in a Special Meeting that contained a set of damaging proposals that only passed because of the APE class voting weight, and its share distribution to private equity companies that were also AMC convertible loan lenders.
The NYSE's reprehensible disregard for our rights has precipitated a grave erosion of our ownership and voting power – a calculated affront aimed at wresting control from retail investors. In essence, the company, AMC, has insidiously introduced a concept akin to eminent domain through the issuance of AMC Preferred Equity Unit (APE) convertible shares. And undercut a fundamental tenet of the free equity market; ownership.
I implore you to investigate the events surrounding the planning and issuance of APE by the NYSE. Note that many retail shareholders have submitted official complaints to the NYSE issuance of APE and asked them to hold the passing of the proposals last week. None of which came to fruition to stop the huge decay of AMC price last week, when the proposals were set in motion. I am at your disposal to answer any questions, provide any receipts to communication with the NYSE, or to testify under oath.
NYSE RULES
https://nyseguide.srorules.com/listed-company-manual/09013e2c8554a7d0?searchId=1216337708
Rule 312.03, which requires companies to obtain shareholder approval before issuing securities that would result in a change of control or a material dilution of shareholder voting power.
Rule 312.04, which requires companies to obtain shareholder approval before issuing securities that would result in a material increase in the number of outstanding shares of the same class (or convertible class) as securities already listed on the NYSE
Rule 312.05, which requires companies to obtain shareholder approval before issuing securities that would result in a material increase in the number of outstanding shares of a new class of securities.
Rule 313, which requires companies to disclose in their proxy statements any material information about proposals submitted for shareholder approval, including proposals related to the issuance of securities.
Rule 703.05, which requires companies to obtain shareholder approval before issuing securities that would result in a material dilution of shareholder voting power in connection with a merger, acquisition, or similar transaction