Closed signs on an AMC Theatre during the coronavirus outbreak COVID-19 in New York.
On Monday, Meme stock AMC Entertainment Holdings surged in premarket trading after a judge blocked the theater chain's stock conversion plan that risked diluting investors' holdings in the company.
The highly shorted AMC common shares were among the most traded stock options before the open bell at 05:58 a.m. on Friday. ET, up 59% to $6.99, sank to a six-figure surge. Preferred shares APE were down 2.8% at $1.75.
The stock was trending on investor-focused social media stocktwits.com, signaling retail traders' interest in the stock.
A Delaware court judge said on Friday she could not approve a deal that would potentially provide current shareholders with additional shares worth $129 million as it would also settle potential claims by preferred shareholders who were not represented in the lawsuit.
AMC had filed suit in February alleging that a plan to convert preferred stock to common stock was enacted to circumvent the will of common stockholders who opposed the issuing of new shares.
The company's CEO, Adam Aron, said on Sunday that the company had filed a revised petition for a stock conversion plan addressing the Delaware court's concerns over other shareholders.
The suit is a hurdle for the company with a high cash burn rate, as it intends to pay down some of its $5.1 billion in debt by selling more shares and possibly avoiding bankruptcy.
In a win for theater chains globally, the much-hyped movies Barbie and Oppenheimer drew crowds after sluggish ticket sales in June and July. For just the fourth time in history, domestic ticket sales for all movies topped $300 million in the United States and Canada, according to studio estimates.
About 28% of AMC's free float shares are shorted, analysts firm Ortex said.
Other favorites among retail investors also gained. GameStop rose 3.6%, while Koss Corp climbed 15%.