Aug 14 (Reuters) - AMC Entertainment's shares slid 35% in premarket trading on Monday on fears that the approval of a revised stockholder settlement will allow to company to issue more shares to raise capital, a move that will dilute the worth of each common share.

The common shares dropped to $3.45 in trading before the bell. The preferred stock units called "APE", which trade at a significant discount to common shares, jumped 27.5% to $2.27.

Under the settlement, AMC will provide stock worth an estimated $129 million to common shareholders to settle potential legal claims related to a stock conversion plan.

The approval comes just three weeks after the judge rejected a prior version of the settlement.

The ruling paves the way for the company to follow through its plan announced in March that include converting preferred share units into common stock, a one-for-ten reverse share split and potentially sell more shares as it attempts to pay down some of its $5.1 billion in debt.

Wedbush analysts said they expect AMC and APE shares to converge around $3 per share before the conversion, and to $30 post the reverse split.

"Should AMC remove substantially all of its debt (through equity raises), it runs the risk of losing its shareholder base after diluting shares," Wedbush analysts said.

CEO Adam Aron called the ruling a "significant milestone" for the company on Twitter and said details and timeline of plan to convert "APE" units will be announced on Monday.

AMC was at the heat of the meme stock mania in 2021 and the company launched preferred "APE" units as a special dividend last year in a nod to retail investors who call themselves "apes" on social media such as Reddit and Twitter.

Aron said the company has raised $418 million in cash through the sale of "APE" units over the past 12 months.

AMC was sued earlier this year by some investors who alleged the company was attempting to circumvent the will of common stock holders who opposed the company diluting their holdings.

The world's largest movie theater chain last week reported a surprise quarterly profit as movie theaters saw a gradual revival following an uneven recovery from pandemic lows. (Reporting by Medha Singh in Bengaluru, Additional reporting by Akash Sriram; Editing by Saumyadeb Chakrabarty)