Cineworld (CINE Stock) share price plunges to record low

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Cineworld’s share price fell more than 40% to a new record high today after the cinema chain announced that recent admission levels were below expectations and that it may well have to take measures to strengthen its balance sheet and restructure its finances.

Management appears to blame a limited movie slate that is expected to run through November 2022, which could impact the company’s liquidity position in the near term. Unsurprisingly, this was not well received by investors, fearing that Cineworld would have to raise additional capital through a share offering or other refinancing program.

Today’s announcement is more unexpected given the recent update from US-based AMC Entertainment, which said the new Dr. Strange movie and Top Gun: Maverick saw sales of tickets doubled, as American bettors flocked to the big screen.

AMC also said July saw the highest monthly attendance in US theaters since December 2019 as confidence returned. This begs the rather tricky question of what AMC is doing that Cineworld clearly isn’t doing, because the two can’t be right?

Either those two movies were hugely popular or they weren’t, and if AMC had record box office admissions in July, Cineworld probably has to wonder why it didn’t. That’s the question shareholders need to ask management.

More than a year ago, Cineworld management faced shareholder revolts over a controversial pay and bonus scheme. Today’s announcement is likely to reignite this debate and raise legitimate questions about the competence of the current management.

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