The show is over. Last week Cineworld Group’s shares plunged by 80% on rumours that it was about to declare bankruptcy. This week it confirmed that it is considering a voluntary Chapter 11 filing in the US as it attempts to reduce its $5bn debt mountain, say Luca Casiraghi and Thomas Seal on Bloomberg. In theory, the move will allow the world’s second-largest cinema chain to keep operating while it works out a plan to repay creditors.
However, in practice shareholders are almost certain to be either completely wiped out, or at least heavily diluted, in any agreement.
Cineworld’s decision to file for bankruptcy comes as the industry has been “battered” by the pandemic, which closed cinemas for long periods in 2020 and the first half of 2021, say Madeleine Speed and Oliver Barnes in the Financial Times. This collapse in sales made the debt pile all the more onerous. The company has already nearly gone bankrupt twice over the past two years, with the share price falling from 180p before Covid-19 to just 4p today.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Going upmarket has backfired
The industry is still suffering from revenue lost during lockdowns, says Robbie Collin in The Daily Telegraph. Hollywood has also “resoundingly failed to furnish cinemas with enough fresh material to bring trade bouncing back”. The supply of summer blockbusters is “between a half and a third of the typical pre-pandemic crop”. However, while rivals such as Vue have had some success with “dramatic” cuts to ticket prices to lure consumers back in, Cineworld has gone in the opposite direction, charging customers more for “premium experiences” – a strategy that seems to have backfired.
Cineworld has complained about “dampened cinema attendances” caused by a “weaker slate of films”, says Sabah Meddings in The Sunday Times. But this appears to be a “diversion tactic” to hide the consequences of its “aggressive overexpansion”. It bought US giant Regal for $3.6bn in 2018 and then spent another $2.1bn on Canadian chain Cineplex just weeks before the first lockdown. Despite CEO Mooky Greidinger boasting at the time that the latter deal would create “compelling value for shareholders”, he later tried unsuccessfully to renege on the agreement, only to lose the subsequent court cases.
Like the other Cineworld shareholders, Greidinger and his brother are sure to see their 20% stake become“near-worthless” in any restructuring, says Nils Pratley in Guardian. But there is a lingering fear that we may not have seen the last of them, as there may still be “a temptation to see the family as vital to a post-restructuring corporate sequel”. If so, this should be resisted as the duo’s “debt-fuelled stewardship of Cineworld” has been a “calamity”. This is an “uncomplicated chain of cinemas that doesn’t need the old cast at the helm”.
-
Will the Bitcoin price hit $100,000?With Bitcoin prices trading just below $100,000, we explore whether the cryptocurrency can hit the milestone.
-
Inheritance tax receipts jump 11% even before Autumn Budget overhaulOfficial figures show inheritance tax receipts are rising even before the chancellor’s changes to reliefs
-
Halifax: House price slump continues as prices slide for the sixth consecutive monthUK house prices fell again in September as buyers returned, but the slowdown was not as fast as anticipated, latest Halifax data shows. Where are house prices falling the most?
-
Rents hit a record high - but is the opportunity for buy-to-let investors still strong?UK rent prices have hit a record high with the average hitting over £1,200 a month says Rightmove. Are there still opportunities in buy-to-let?
-
Pension savers turn to gold investmentsInvestors are racing to buy gold to protect their pensions from a stock market correction and high inflation, experts say
-
Where to find the best returns from student accommodationStudent accommodation can be a lucrative investment if you know where to look.
-
Best investing appsLooking for an easy-to-use app to help you start investing, keep track of your portfolio or make trades on the go? We round up the best investing apps
-
The world’s best bargain stocksSearching for bargain stocks with Alec Cutler of the Orbis Global Balanced Fund, who tells Andrew Van Sickle which sectors are being overlooked.
-
Revealed: the cheapest cities to own a home in BritainNew research reveals the cheapest cities to own a home, taking account of mortgage payments, utility bills and council tax
-
UK recession: How to protect your portfolioAs the UK recession is confirmed, we look at ways to protect your wealth.
