- Shares down 99% from pre-Covid highs
- No plan to sell off individual assets
- Shareholders warned they could lose everything
The latest update from Cineworld (CINE) did nothing to lift investor spirits heading into the new year.
Shares in the movie-theatre operator initially dropped as much as 23% to a new intra-day low of 2.8p before recovering to 3.4p after the firm denied media talk of individual asset sales and cautioned existing shareholders they faced ‘significant’ dilution at best.
HORROR SHOW
Cineworld shares are down more than 99% from their 2019 peak, but anyone thinking of trying to pick up a bargain should take heed from the company’s latest press release.
Having announced in September it was seeking a Chapter 11 restructuring plan in the US, the company’s board says it is still working on a deal to ‘maximise value for the benefit of moviegoers and all other stakeholders’.
The board also roundly rejected recent press reports it had been in talks with Odeon owner AMC Entertainment (AMC:NYSE) regarding the sale of some of its cinema assets, saying it was looking to restructure the firm’s capital while at the same time marketing the company for sale as a whole.
The firm will ‘reach out’ to potential buyers this month, but it says any sale of the group as a whole ‘would not include the sale of Cineworld itself and would therefore not be subject to the rules of the Takeover Code’.
BUYERS BEWARE
While investors with an enhanced risk appetite might see the latest sell-off as an opportunity to pick up Cineworld shares on the cheap, it is worth noting the firm’s closing comments.
As it has previously spelled out, any restructuring or sale agreement with stakeholders is likely to mean ‘a very significant dilution of existing equity interests’.
In case that isn’t sufficient deterrent, the firm goes on to say there is ‘no guarantee of any recovery of holders of Cineworld’s existing equity interests’, meaning anyone owning the shares could see the value of their holding wiped out completely.
