Shares of movie theater leader $AMC Entertainment (AMC.US)$ are trading down Tuesday. Here's the reason why.
What Happened: Shareholders of AMC Entertainment approved a vote for the conversion of $AMC Preferred Equity Unit (APE.US)$ into common shares.
The company encouraged shareholders to approve the proposal to help secure the company's future.
AMC CEO Adam Aron stressed the importance of raising cash and reducing debt for the company's survival.
A special shareholder meeting Tuesday saw the APE conversion proposal pass a vote, according to The Hollywood Reporter. There were 978 million votes in favor of the proposal, representing 88% of the vote.
Of the voted shares, 11.2% voted against the proposal. Another 1% of the votes abstained.
The shareholder meeting also had a proposal by AMC to change its share structure and conduct a reverse split of 10-for-1 shares pass.
"I would like to commend our shareholders for the wisdom exhibited in your votes by approving this proposal, and doing so by a wide margin. This is a landslide victory that shows your determination to keep AMC a strong and innovative company and the leader of our industry," Aron said.
The conversion of the APE units was approved by the shareholder vote but could face a delay due to a court hearing in the month of April.
Why It's Important: The votes could help AMC raise additional capital to pay off debt and increase its cash going forward.
Opponents of the planned conversion have pointed to potential dilution to shareholders of common stock in AMC.
AMC ended the first quarter with available liquidity of $842.7 million and debt of $4.95 billion.
In 2022, AMC sold 207.8 million APE units for proceeds of $228.8 million. In the first quarter, AMC sold an additional 6.6 million shares of APE units to raise $9.6 million.
AMC, APE Price Action: On Tuesday, shares of AMC are down 15% to $4.64; shares of the APE units are down 5.2% to $1.64.