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I dont see a rights issue happening unless absolutely necessary and the USA situation gets much much worse. Also, lets not forget Mooky is known for non diluting shares as it would in effect impact his own finances being a major shareholder.
Waiting before topping up wont hurt and may indeed help you get a better buy in price to average down etc. Much better than buying on a spike but dont miss the boat....
@racandfz
Cineworld have an estimated monthly burn rate of £30-£40 million a month, that's with their staff on furlough, as outlined by Fitch Ratings.
The SP currently stands at £500 million.
A 10% dilution at current prices would only raise £50 million in a best case scenario, enough for 1.5 months running costs only, that too with staff on furlough!
They would have to dilute massively to raise any real cash if they went down that route.
Cineworld operate in a world of very small margins, having only made a profit of £134 million in 2019, under normal cinema attendance and with £320 million less debt than they have now.
Cineworld have already lost out on a third of their 2020 potential revenue of an estimated £1.15 billion since their global sites closed for the last 4 months.
In fact, Fitch Ratings have outlined they believe Cineworld will breach their existing debt covenant agreement and will require further help from their lenders.
They key here is getting the cinema attendance back to normal. Getting the big movies released and getting all sites open as fast as possible and praying that Covid-19 doesn't surge. Unfortunately, both studio releases and Covid-19 are outside of the control of Cineworld.
Even if the best case scenario happens, don't expect a dividend for several years. The debt that Cineworld have accumulated and the pending court case will eat away any profits Cineworld is due to make for the forseeable future. Getting anywhere near £2 a share again is a pipe dream for now. The only reason to be in here now is for capital appreciation on the value of the stock, hedging a bet that Cineworld can weather the Covid-19 storm and turn the ship around for the better.
Yes, I agree. Liquidity is there moving forward.
My argument was the "what if" scenario would not actually be a negative.
Thanks for the replies. I understand CINE have enough liquidity till July 2021 but correct me if I’m wrong that has never been stated clearly in an RNS. While Mooky does have a good track record these are extraordinary times and shareholders could be tapped for finance. I want to get in at these levels but in my opinion there is still downside risk. 10 or 20% dilution is not to be sniffed at if I invest today and a rights issue is announced next week.
So +ve either way.
Absolutely, but a rights issue would likely accelerate SP growth due to even better liquidity without additional debt drag.
Personally, it doesn't seem likely at the moment anyway.
Brodders Cine have enough liquidity till July 2021 even if cinemas did not reopen this year. Mooky has said that Cine were never in the woods.
A rights issue at todays SP price is not likely to be too much of a drag as the price recovers.
e.g. If a dilution was very high at 20% but you recover from say today at 36p to 80 over next few months, what's the problem? 80p just becomes 64p. A rise to 100p makes equivalent to 80.
Running costs for 12 month at 48mill is circa 600mil. So a max dilution of 10% would do that.
It would be an issue at a pre covid SP price of say 200pence plus.
Basically today's low SP is not really at risk from a rights dilution. In fact it would likely help the SP more due to increased liquidity without increased debt.
I bought CINE pre COVID so my losses are looking rather unhealthy. Considering putting a fair chunk in here at these levels but what are people’s thoughts on a rights issue? And share value is diluted. Where to then? In my opinion it is a very real possibility considering debt levels etc.