AMC Entertainment Stock News: Court dismisses APE conversion

AMC Entertainment (AMC) stock spiked afterhours on Wednesday after news broke that the court considering CEO Adam Aron's strategy of converting APE Preferred Equity units in AMC common stock ruled against lifting its status quo order. AMC stock leapt 12.6% on the news to $4.56, while APE units slumped 10.5% to $1.53. 

NASDAQ futures are off 0.2% in the premarket, while S&P 500 and Dow futures are slightly green. The market continues to digest the lower ADP employment figure released on Wednesday, which came far below expectations. AMC's stock movement have nothing to do with overall meme stock fandom as GameStop (GME) fell 1.3% on Wednesday and remains flat in the premarket.

AMC stock news: Back to square one

AMC stock and APE units were trading in the opposite direction just two days ago. That was when AMC said in a filing that it had agreed to a settlement with the litigants. Now, however, the Delaware Court of Chancery has halted the settlement that would have set up AMC to sell further equity and then pay off more of its heavy debt load.

After denying to lift the status quo order, the judge in the case wrote: "The parties seek to lift the status quo order to allow the defendants to complete their settlement obligations before the settlement is noticed, considered, and approved. [...] This Court has cautioned against parties performing even partial settlement obligations before a settlement hearing, as doing so prevents the Court from meeting its obligation to oversee class action settlements."

It seems that AMC tried to convert APE to common shares, raise equity, and complete their 1-for-10 reverse split all at once, and the court was not having it. Now AMC will need to abide by the court's timeline. AMC will once again be in court on April 27 for an injuction hearing. At that time these issues will be raised once again, and AMC stock will likely trade on the market's prediction of that outcome.

AMC's Monday filing said the company was interested in selling another 25.8 million shares of common stock, which would net it somewhere north of $100 million.

AMC stock forecast

AMC stock is back above $4.50 to be sure, whereas it was headed for January's $3.80 support level prior to the recent news. The court stay, however, has not pushed the stock up to its $5 price tag prior to Tuesday's announcement, which sent the stock reeling. It is best not to get too excited about AMC stock until it closes above $5. That level has been significant as support over the past four months, and if it becomes resistance then all bets are off. A break of the $5 price level though would likely see bulls rush in and try to push the price up to the $7 resistance.

AMC daily chart