NEW YORK, July 18 (Reuters Breakingviews) – After raising $1.8 billion from retail investor-fueled share sales in 2021, AMC Entertainment’s (AMC.N) boss Adam Aron pushed unorthodox governance workarounds to keep the movie theater chain afloat. Now, those meme-stock traders are holding his feet to the fire.
Shareholder Kevin Barnes is suing AMC to compel it to hold an annual meeting, which he says is late and a needed corrective after two board members were installed without a vote.
AMC is already fighting another lawsuit over its attempt to convert preferred stock into common shares, a novel scheme to avoid getting investors’ approval for share sales. It fits with other forays since AMC became a retail-favorite meme stock – like buying into a gold miner – that seem to disregard conventional governance niceties.
But AMC is still a public company, with the responsibilities that entails. Attracting a rush of retail traders means there are plenty of investors to call foul. If their push against the preferred stock gambit succeeds, AMC could struggle to raise new funds, which bodes poorly for repaying its $5 billion in debt. Barnes’ suit, which calls AMC out for “suboptimal governance,” adds another headache. It turns out that, for a meme stock’s final act, the audience starts throwing tomatoes. (By Anita Ramaswamy)
(The author is a Reuters Breakingviews columnist. The opinions expressed are their own.)
Follow @Breakingviews on Twitter
Capital Calls – More concise insights on global finance:
Xavier Niel’s GAM raid looks less quixotic read more
Commonwealth Games hit a financial wall read more
Luxury tests limits of its immunity to downturns read more
Argenx drug boost is mixed blessing for suitors read more
Editing by Jonathan Guilford and Sharon Lam
Our Standards: The Thomson Reuters Trust Principles.
Opinions expressed are those of the author. They do not reflect the views of Reuters News, which, under the Trust Principles, is committed to integrity, independence, and freedom from bias.