AMC Entertainment Holdings Inc. common stock sank and its preferred shares rallied after investors approved a series of steps that the movie theater operator has said will help it raise cash and reduce debt.

Voting at a special meeting on Tuesday, investors backed plans to increase the company’s shares outstanding and implement a 1-for-10 reverse stock split. The two proposals will allow the company to convert a recently issued series of preferred shares, known by their trading symbol APE, into common stock, although the moves are being challenged in court. 

Taken together, the measures should give AMC the flexibility to issue new stock, exchange debt for shares or make acquisitions. The theater chain has struggled to stay afloat after borrowing heavily and then seeing its business collapse in the pandemic. 

The APE shares soared as much as 22 per cent on the news, but have since pared that gain and are now up about seven per cent to US$1.H84. AMC common stock sank 12 per cent to US$4.79, bringing the gap between the two asset classes to US$2.82.

“I would like to commend our shareholders for the wisdom exhibited in this meeting,” Chief Executive Officer Adam Aron said. AMC said the outcome of the vote would help combat “naysayers and prophets of doom.”

Litigation in Delaware is challenging the share increase. Aron told investors last month that no conversion will happen until the legal issues are resolved.

The company, based in Leawood, Kansas, is the largest owner of cinemas in the world. AMC averted bankruptcy two years ago after selling new shares to meme-following day traders. Those same investors pushed back against the company’s proposal to increase its share count in 2021, and AMC dropped plans to do so. 

Theater chains, including Cineworld Group Plc which filed for bankruptcy last year, have been stung by a slow recovery in moviegoing. Ticket sales are running about a third below 2019 levels, with many consumers choosing to watch films at home on streaming services. 

The shareholder advisory firms Institutional Shareholder Services and Egan-Jones Proxy Services recommended that their clients support AMC’s proposals.