Last month, I blogged about AMC’s efforts to cultivate the meme stock “apes” who’ve pushed the company’s valuation to staggering heights. Part of that effort was directed at persuading stockholders to authorize another 25 million shares so the company could continue its efforts to shore up its balance sheet through stock sales. That effort apparently failed, as AMC’s CEO Silverback Adam Aron acknowledged when he took that proposal off the table last week. Here’s an excerpt from a recent MarketWatch.com article:
In a Tuesday morning filing, AMC Entertainment AMC, 5.82% disclosed that it is abandoning its request that shareholders approve an issuance of 25 million new shares as part of a planned capital increase that would have allowed the company to leverage its alpha “meme stock” status but also diluted the stakes of existing stockholders who are overwhelmingly retail investors and who have made their opposition to the plan quite plain on social media.
AMC chief Adam Aron, who has made a habit of engaging directly with the retail investors now thought to hold roughly 80% of his company’s shares, took to Twitter minutes after the filing to let his base know that they were the reason behind his decision.
Accompanied by a picture of the words “I see you, I hear you, I value you,” Aron tweeted that while he still wants the capital from 25 million new shares to pay down AMC’s remaining debt load and give him cash reserves to play with as the theater industry recovers, he is acutely aware of the difference in opinion among AMC’s retail base on social media and “does not want to proceed with such a split.”
While AMC pitched this as a move to keep its retail investors happy, there may be a more pragmatic issue associated with the decision that other meme stocks may also have to face. Put simply, the problem is that retail investors don’t vote. And as an Axios article points out, with an investor base that’s 80% retail, “it’s not clear whether enough of them would have ‘shown up’ to even move the vote forward.”
In other words, AMC may have a tough enough time just getting a quorum for its annual meeting, let alone persuading a majority of the outstanding shares to vote in favor of a charter amendment. As Lynn blogged last week, at least one public company has already had to adjourn its meeting due to the absence of a quorum. With the rise of retail ownership in public companies and TD Ameritrade’s policy change on discretionary voting, chances are that other retail investor-heavy companies are also going to find pulling a quorum together to be a challenge.
-John Jenkins, TheCorporateCounsel.net July 13, 2021