Cineworld Group PLC shareholders are set to be left with nothing, a short seller warned after the world’s second-largest cinema chain operator this week said that it was considering filing for bankruptcy in the US and insolvency proceedings in other countries.
British hedge fund Argonaut Capital Partners LLP’s founder and CEO Barry Norris on Wednesday told Bloomberg that the London-listed Cineworld’s pursuit of acquisitions that were funded by debt had left it with a “completely unsustainable” capital structure.
Norris said Cineworld had a chance to raise equity but didn’t. “This is not a company you should feel sorry for in any way,” he said, adding that it was run “on a wing and a prayer.”
Cineworld, which owns Regal Cinemas, on Monday said the company is considering filing for voluntary bankruptcy, and any filing “would be expected to allow the Group to access near-term liquidity and support the orderly implementation of a fully funded deleveraging transaction.”
Argonaut has shorted Cineworld for four years, the report said.
Cineworld shares slumped as much as 13% Wednesday before trimming the drop to 11% as of 11:01 a.m. UK time. The stock has lost more than 90% of its value in 2022, leaving the firm with a market capitalization of 37 million pounds ($44 million).
The cinema chain racked up large debts from acquisitions and suffered a weak box-office recovery following COVID-19 lockdowns that kept customers away from theaters.
Following its 2018 acquisition of the US chain Regal, Cineworld carries $4.84 billion in net debt and faces nearly $1 billion in damages to Canada’s Cineplex Inc over an aborted takeover bid.
Picture Credit: Forbes
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