The Cineworld Group plc (LON: CINE) share price has fallen 50% in the past month as plans to sell its business fell through due to a lack of bids for its UK and USA businesses, which are its largest operations. The company now has to work out a restructuring deal with its creditors.
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The movie theatre operator’s management team wanted to keep the company intact so that the business could continue benefitting from the economies of scale that apply to large businesses. However, it is now almost inevitable that Cineworld will not sell any of its businesses, including its Eastern European divisions, that had attracted significant attention from potential buyers.
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Cineworld is now preparing to exit the bankruptcy process by securing a deal with its creditors that will wipe out a massive chunk of the debt owed to the lenders, with the remaining debt being converted into equity and wiping out the company’s ordinary shareholders.
The massive decline in Cineworld’s share price can be attributed to the looming wipeout of retail investors once the company agrees to a deal with its creditors. The firm has issued several warnings regarding the looming wipeout of current shareholders.
Still, many are waiting for Cineworld to exit the bankruptcy process so that they can buy shares in the company after the restructuring is complete. Most investors are avoiding the company because of the above factors.
Still, the company’s management team has the difficult task of turning its fortunes around in an industry facing stiff competition from streaming services. However, Cineworld’s CEO, Mooky Greidinger, has expressed confidence in his ability and that of the executive team to revitalise the company.
Cineworld’s biggest worry is the falling number of moviegoers, and the lack of a constant stream of blockbuster movie releases to draw people back into cinemas and movie theatres. However, Mooky and the rest of the Cineworld management team have many years of experience in the industry, making them the right team to fix the company.
Meanwhile, investors must wait for Cineworld to announce the terms of the restructuring and when it shall exit the bankruptcy process.
*This is not investment advice.
Cineworld share price.
The Cineworld share price has fallen 50% in the past month after ditching plans to sell its business.
eToro is a multi-asset investment platform. The value of your investments may go up or down. Your capital is at risk.