Miller Shah LLP, on behalf of a class of individuals and entities that purchased or acquired the common stock of AMC Entertainment Holdings, Inc. (“AMC” or the “Company”) during the class period defined below (“Class”), has filed a motion for preliminary approval of a class action settlement in the matter of Hawaii Structural Ironworkers Pension Trust Fund v. AMC Entertainment Holdings, Inc. et al. The settlement will provide $18 million in relief to the class and resolves allegations that AMC, as well as certain of its corporate executives and financial underwriters, made materially false statements or omissions in connection with the Company’s secondary public offering of common stock (“SPO”) in February 2017, and public filings and statements from December 20, 2016 to August 1, 2017 (the “Class Period”).
As part of AMC’s plan to expand its business in 2016, the company acquired Carmike Cinemas, Inc., a large domestic theater operator, and international operators Odeon & UCI Cinema Group and Nordic Cinema Group AB. AMC financed the acquisitions with a series of loans, which the Company repaid by issuing additional common stock through the SPO pursuant to a registration statement filed with the U.S. Securities and Exchange Commission. In public statements, AMC and its officers touted the operational planning and integration efforts surrounding the acquisitions. On the strength of these statements and other information disclosed in connection with the SPO, AMC raised approximately $618 million.
Despite these high expectations, on August 1, 2017, AMC announced a $174-million-dollar earnings miss expected net miss for the year between $125 and $150 million. As a result, AMC’s stock tumbled 27% the following day. On August 4, 2017, AMC’s CEO outlined multiple potential explanations for the company’s poor performance: Carmike theaters’ substantial underinvestment in its theaters and diminishing market share, the inability to convert Carmike loyalty program members to AMC’s loyalty program, and the seasonality of its European business. Plaintiffs allege that AMC failed to disclose material information concerning the state of the acquired operators during the lead-up to its SPO and throughout the Class Period, and filed suit on behalf of behalf of the Class under the Securities Act of 1933 (“Securities Act”) and the Securities Exchange Act of 1934 (“Exchange Act”).
This lawsuit was vigorously litigated by all parties for over three years. After Plaintiffs filed the lawsuit, AMC moved to dismiss, arguing that the complaint failed to adequately plead that any material misstatements or omissions occurred, and even if omissions occurred, that AMC lacked actionable knowledge at the time of omission. Ultimately, the Court sustained Plaintiffs’ Securities Act and Exchange Act claims that were based on material omissions or misstatements regarding Carmike’s under investment in its theaters, as well as the Securities Act claims that were based on the conversion of loyalty program members and seasonality of European business.
Following the Court’s decision on Defendants’ motion to dismiss, the parties engaged in a comprehensive discovery process, including review of significant volumes of documents and numerous depositions of party witnesses. In addition, Plaintiffs moved the Court for class certification, which the Court granted in its entirety on March 30, 2021. The parties were preparing for summary judgment and an eventual trial when they reached agreement to settle the case.
The proposed administrator for this settlement is Strategic Claims Services, which will establish webpage where class members can access more information about filing a claim and important documents from the litigation, after the Court grants preliminary approval of the settlement. In connection with the settlement, Defendants maintain that they are not liable for any alleged violations of the securities laws.
An update to this blog can be found here. The case is Hawaii Structural Ironworkers Pension Trust Fund v. AMC Entertainment Holdings Inc. et al., Case No. 1:18-cv-00299, in the U.S. District Court for the Southern District of New York.
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