Shares of Cineworld Group Plc (LON: CINE) today rallied 32% higher extending yesterday’s rally driven by the looming prospect of an acquisition by a major Hollywood studio.
The rally which started yesterday extended into today and shows no signs of stopping as investors anticipate a takeover offer of the cinema operator.
We covered the technical reasons why Cineworld stock rallied yesterday and we will now explore the fundamental drivers behind the move.
Investors bid up the cinema operator’s stock after a New York judge terminated the Paramount Decrees, which are a set of competition laws passed in the 1940s barring Hollywood studios from owning theatres.
The landmark Supreme Court ruling in 1948 saw the major Hollywood movie studios divest their theatre studio operations and has effectively barred them from owning and operating movie theatres until now (Friday) when the decrees were lifted.
The lifting of the Paramount Decrees now means that Cineworld, which operates 500 movie theatres within the US could be bought out by one of the major film studios, hence, the rally.
UPDATE: Cineworld shares later spiked 66.86% higher to trade at 68.55p shortly after publishing.
Cineworld Group share price