AMC Entertainment lied about the company's recent mergers and left shareholders under the burden of a "liar's discount" on Wall Street, a lawsuit claims.
The lawsuit, filed in U.S. District Court in Kansas City, Kan., cited "false and misleading" company reports and public comments by AMC CEO Adam Aron about the 2016 merger with U.S. rival Carmike and purchases of European cinema chains. Those deals transformed Leawood-based AMC Entertainment into the largest theater chain in the world and landed a big bonus for Aron.
AMC officials could not be reached for comment.
Aron and AMC, the lawsuit said, failed to disclose problems at Carmike, seasonal differences between moviegoers' habits here and abroad and other issues that led to disappointing financial results at AMC last summer.
Shares of AMC lost more than a fourth of their value on Aug. 2, 2017, after the company reported those results.
"AMC has also suffered and will continue to suffer a loss of reputation and goodwill, and a 'liar’s discount' that will plague the company’s stock in the future due to the company’s and their misrepresentations," the lawsuit said of Aron and other individuals named in the action.
The lawsuit cited investment analysts' reactions during a conference call with AMC executives that followed a quarterly report that had revealed issues analysts were not aware of previously.
Chad Beynon, with Macquarie Research, asked about AMC's report revealing the seasonal differences in the U.S. and European cinema markets, which Aron cited as one reason the quarter's results had been "simply a bust," according to the lawsuit.
Beynon called the filing "super helpful for us to understand the seasonality, particularly for the international business," according to an edited transcript of the call from Thomson Street Events. Then he asked, "Was there a reason why you weren't able to disclose this? Or did you kind of just gather the information? Just trying to get a better sense of why this was just kind of released when it was released."
AMC's finance chief explained in some detail differences between accounting practices here and in Europe, an answer the lawsuit said missed the point.
Another analyst cited the disclosure of the seasonal differences as having "played a role in our (and likely the street's) mismodeling of the quarter," according to the lawsuit.
The lawsuit names AMC, Aron, other executives and the company's directors as defendants.
But the suit says AMC itself is only a defendant in name. The suit seeks damages against the individuals on behalf of the company, for example, asking that executives and directors be required to disgorge financial benefits from stock transactions and performance bonuses.
AMC Entertainment faces other shareholder lawsuits regarding its mergers and acquisitions in federal court in New York.
China-based Dalian Wanda owns most of AMC Entertainment, but its other shares continue to trade publicly in the United States. Wanda is not named as a defendant in the recent lawsuit.