The Cineworld Group plc (LON: CINE) share price has risen 18% over the past week as investor sentiment towards the company turned positive. While the percentage gains made by Cineworld shares look impressive, the gains in terms of pence are minimal at best.
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Investors should know that there is no benefit to holding Cineworld shares now since all retail shareholders are set to be wiped out once the company files for administration in the UK and get out of the voluntary Chapter 11 bankruptcy proceedings that it entered into in September 2022.
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The company’s leaders will be the ultimate owners of Cineworld following the administration, as Cineworld shares will be cancelled from trading on the London Stock Exchange’s (LSE) AIM market. Therefore, the recent gains in Cineworld stock should not entice retail traders to buy the shares.
Cineworld’s lenders will own the company via a newly incorporated HoldCo and will be the ultimate decision-makers regarding its future. The lenders recently appointed Eduardo Acuna, the CEO of the Americas operations of Mexican theatre operator Cinepolis, who will become its CEO when the company emerges from bankruptcy proceedings.
In late June, the lenders had appointed former Pepsi executive Eric Foss as its new chairman. The two leaders will be tasked with turning around Cineworld after the exit of Mooky Greidinger, who has been Cineworld’s CEO since 2014. Mooky had been running Cineworld with the help of his brother Israel Greidinger.Â
The lenders are not keen on keeping the Greidinger brothers on after the bankruptcy process, primarily because he was responsible for saddling the world’s second-largest movie theatre chain with massive debts due to an aggressive acquisition strategy.
Still, one could argue that the COVID-19-related movie theatre lockdowns accelerated Cineworld’s problems, and they would not be wrong in that assessment. Still, having a new person in the CEO and chairman roles will bring new ideas to the company and help it grow in future.
The Chapter 11 bankruptcy exit deal will see Cineworld release about $4.53 billion of its existing debts while engaging in a rights issue to raise gross proceeds of $800 million and provide $1.46 billion in new debt financing.
*This is not investment advice.
The Cineworld share price.
Cineworld shares have risen 18.03% in the past week despite looming administration. What’s next?
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