Cineworld Shares Plunged 32% on the Bankruptcy Process Update

The Cineworld Group plc (LON: CINE) share price plunged 31.9% after releasing an update on the progress of its chapter 11 bankruptcy cases in the United States. The company noted that it had received interest in some of its assets through the ongoing marketing process but that none of the offers was an all-cash deal.

The world’s second-largest movie theatre chain further confirmed that it was in talks with some of its leading stakeholders about creating a reorganisation plan as fast as possible, given the current circumstances and the lack of a firm offer for all of the company’s assets.

As I mentioned in my previous article, based on the court proceedings, Cineworld did not receive a single offer for its UK or US assets, which comprise the bulk of its movie theatres. Still, the company received 40 offers for its European and Israeli theatres.  

Cineworld confirmed that it was reviewing all the offers along with its crucial stakeholders and was yet to decide whether to unload some of its assets. The company’s Eastern European assets attracted the most interest from the bidders, and Cineworld’s creditors may decide to accept an offer for the assets. 

The company reiterated that any sale of the whole group would not involve the transfer of existing equity interests and, as such, would not be subject to the rules stipulated in the Takeover Code.

Cineworld further warned investors that even as it continues negotiating the terms of a restructuring plan with its primary creditors, there is little chance that the creditors will allow it to recover the existing equity interest. Therefore, there is almost no chance that Cineworld’s current shareholders will be compensated after the restructuring. 

The above comments triggered the selloff in Cineworld’s shares, given that very few people want to hold company shares that are guaranteed worthless if there is a successful retsructring. Right now, the likelihood of restructuring is relatively high. 

Cineworld also reassured investors that its cinemas were operating as usual despite the ongoing bankruptcy proceedings. The company’s Regal, Picture House, Cinema City, Cineworld and Planet theatres still welcome customers and honour membership plans. 

*This is not investment advice. 

Cineworld share price. 

The Cineworld share price plunged 31.85% to trade at 2.76p, from Thursday’s closing price of 4.05p.