The Cineworld Group plc (LON: CINE) share price has been trading sideways even as shareholders grapple with the looming wipeout of their shares as the company moves ahead with restructuring plans that will wipe out existing shareholders.
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Still, is there any point in holding Cineworld shares now? The short answer is no. All existing shareholders will be wiped out once the restructuring is complete, given the massive debts the company owes its creditors, who will now convert the same into equity.
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However, nothing stops you from buying Cineworld shares once the restructuring is complete and the creditors have converted their debts into equity. Cineworld recently abandoned plans to sell its UK and US businesses amid a lack of offers.
Cineworld has been unable to find offers for the entire business like the company’s management team wanted since most of the offers received were for its Eastern European business, which is growing, while its UK and US businesses are operating in mature markets.
Nevertheless, the world’s second-largest movie theatre chain continues operating cinemas across multiple international markets. Investors and creditors must continue trusting the current management team led by the Greidinger brothers to keep running the company.
The path ahead for Cineworld is full of challenges, but with the help of its creditors, the company can navigate the uncertain path ahead and emerge victorious in the end. Meanwhile, as a prudent investor, I would stay away from Cineworld shares until after completing the restructuring.
Cineworld has to contend with a rapidly changing movie theatre industry, competing with movie streaming services launched by some of the biggest movie production companies to bring blockbuster movies to their viewers via a subscription model.
Still, Cineworld and other movie theatre operators have an advantage in that nothing can replace the movie theatre experience unless one has a movie theatre at home, which is not common given the costs of building such a room in a house.
Therefore, demand for movie theatres will remain high, but Cineworld and its peers must keep innovating to draw more people to their movie theatres.
*This is not investment advice.
Cineworld share price.
The Cineworld share price was trading up 5.08% at 1.21p, from Thursday’s closing price of 1.17p.
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