Bloomberg Law
March 15, 2023, 9:47 PM

AMC APE Holder Loses Bid to Enter Stock Conversion Court Fight

Mike Leonard
Mike Leonard
Legal Reporter

An attorney owning a large number of AMC Entertainment Holdings Inc.'s preferred equity units, called APEs, lost his bid to join a legal battle over the company’s alleged plan—approved a day earlier—to sideline retail investors.

Vice Chancellor Morgan T. Zurn denied Frank Iacono’s motion to intervene in the case, saying his interest in having the dispute resolved earlier than an April 27 court hearing—which stems from options expiring April 21 that Iacono bought as a hedge—is too indirect.

The court fight comes two years after investors coordinating through Reddit saved AMC from the brink of bankruptcy in a surprising “meme stock” rally prompted by spite toward hedge funds that had taken short positions against the theater operator as the Covid-19 pandemic shuttered cinemas.

Zurn, writing for Delaware’s Chancery Court, found Wednesday that Iacono’s concerns are “not sufficiently related to the transaction at the heart of this matter"—the company’s alleged plan to dilute ordinary shareholders through a complex corporate engineering scheme.

His “interest is not in the claims themselves, but in the parties’ procedural response to them,” she wrote. “Mr. Iacono’s collateral and indirect economic interest is not a sufficient basis for intervention.”

The ruling came a day after AMC investors approved the company’s plan to raise its authorized share limit and covert the APEs into ordinary stock. The corporate election included both owners of class A stock and holders of the APE units, which represent 1/100th of a preferred share worth 100 votes.

Zurn previously let the shareholder meeting proceed but ordered AMC to wait until after an April 27 hearing before implementing any changes.

‘Supercharging’ APE Vote

AMC’s leaders allegedly saw its salvation by retail investors as a mixed blessing. They became frustrated as small investors thwarted attempts to increase the class A share limit and convert 10 million preferred shares—each holding 100 votes—into class A stock, according to the proposed class action.

Although the APE units are theoretically equivalent to class A stock, they have allegedly tended to trade at a steep discount due to uncertainty about whether the share limit increase would ever be authorized. That trend reversed itself sharply on news of the investor vote Tuesday.

According to the lawsuit, AMC violated Delaware’s corporate laws by letting APE holders—including Antara Capital LP, which holds 30% of the preferred units—participate in the vote. The changes would allegedly reduce the voting power of the company’s current class A investors from 100% to 35%.

The suit also accuses AMC of “supercharging” the APEs by directing a stock depositary company to vote all 10 million preferred shares proportionately based on actual votes cast. Class A investors, meanwhile, allegedly had to participate if they wanted their votes counted.

No Personal Stake

Iacono moved to intervene in the case March 2, saying his stock options—which expire April 21—gave him a personal stake in opposing the court-approved joint agreement to hold off on implementing the vote results until at least April 27.

Zurn rejected that argument. As a general matter, an “intervenor’s interest must be in the claims in the action in which they wish to intervene, not in the effects that action might have on the intervenor’s economic interests,” the judge wrote.

Iacono also doesn’t appear to have any tangible interest in “the legal and factual questions the original parties raised,” only in “the subsequent stipulated timing of the litigation,” she added.

The investors leading the litigation are represented by Grant & Eisenhofer PA, Saxena White PA, Friedman Oster & Tejtel PLLC, Bernstein Litowitz Berger & Grossmann LLP, and Fields Kupka & Shukurov LLP.

AMC and its board are represented by Richards, Layton & Finger PA and Weil, Gotshal & Manges LLP. Iacono is representing himself.

The case is In re AMC Ent. Holdings Inc. Stockholder Litig., Del. Ch., No. 2023-0215, 3/15/23.

To contact the reporter on this story: Mike Leonard in Washington at

To contact the editors responsible for this story: Rob Tricchinelli at; Andrew Harris at

Learn more about Bloomberg Law or Log In to keep reading:

Learn About Bloomberg Law

AI-powered legal analytics, workflow tools and premium legal & business news.

Already a subscriber?

Log in to keep reading or access research tools.