Cineworld (CINE) reckons that as the world emerges from the scamdemic its trading is improving helped by some really great movie releases. I am not quite so sure about that and today’s trading update misses out the most critical number investors need to see, the movement in the vast debts in which this company is drowning. That omission tells you all you need to know.
I trust that numerous warnings from myself and Lucian have allowed you to make good money from shorting Cineworld (CINE) all the way down. The shares have collapsed this week on news that it has lost a Canadian court case and is on the hook for C$1.23 billion but that merely accelerates the end game here. Do not even think of closing your short at 31p. My target is buttons. Post an inevitable debt for equity swap and bailout placing this is a penny share.
We have warned numerous times on this website that Cineworld (CINE) is drowning in debt and thus needs a debt for equity swap and a massive fund raise which will dilute all current shareholders massively. Our complete coverage is HERE — nobody could say we have not got this 100% right. Could things get any worse? They just did.
In its November 15 trading update Cineworld (CINE) included a table, which compared revenue from months in 2021 with revenue from months in 2019. This was an attempt to illustrate that cinema viewings were returning to pre-covid levels, the CEO specifically commented that “We are thrilled to see audiences returning in significant numbers”. As Tom pointed out then, Cineworld made these comparisons notwithstanding that October 2021 had five weekends whilst October 2019 only had four weekends. Given that cinema viewings tend to cluster around the weekend, this meant that the October 2021 numbers artificially appeared stronger than reality.
In the last week shares in Cineworld (CNE) rose 25% from 66p to 83p, adding around £230 million to its market cap. To put that number in perspective it represents more that its entire profit before tax in 2019, the last full year without Covid.
I still cannot see the case for owning shares in a cinema chain, any cinema chain but Cineworld (CINE) has its own additional problems and the debt markets are telling you that thy are going to come home to roost very soon.
