Member Info for giantsquid

OhhAhh, the shares are technically worthless if total liabilities exceeds total assets. The idiocy of some investors is they ignore £8bn debt and a huge court case the company has just lost, and say everything's going to be fine though because superman is doing well at the box office.. I mean how stupid do you have to be to think a movie or two is going to magically solve the company's debt probelms? Do I think Cineworld have lovely cinemas? Absolutely yes. Would I want to invest in a company though that has a debt pile nearly 20 times market capitalisation? Absolutely no.

The cinemas are nice. There's a few good movies about. Plenty of people are still keen to go to the cinema. But that's not the issue. The issue is the company itself - nothing the company does hereon can possibly even hope to make a dent in the debt mountain they're under. And losing that court case was just the final nail in the coffin. Nobody wants to see the company go under, but my view is it's now inevitable - and a few good movies isn't going to make any meaningful difference to the company's fortunes imho.

I'm a regular cinema goer myself, I think Cineworld cinemas are fantastic. But I don't see any future for the company. I think Cineworld will go under within 2 years, possibly a lot sooner. It's a great shame but the debt mountain will be the death of them. It's a just a question of when, not if.

When total liabilities exceeds total assets, Nav per share = 0p or less. That's the true value of the company. Market value is often detached from reality because small investors rarely take fundamentals into consideration, they make investment decisions based entirely on what the share price is doing. The limit of most investor's research is they see 32p and consider it a screaming buy based entirely on the fact it used to double or triple that. In the short term, this kind of market action may be enough to hold the share price up - but if the company is drowning in debt, is technically over-valued, then eventually, sooner or later there's likely to be a huge negative correction. I think people are confusing the fact that - yes, cinema is still very popular and the punters are still keen to go to Cineworld and watch a movie. That's not the issue though. The issue is the company is up to its eyeballs in debt and has just lost a huge court case it's desperately trying to appeal.

Cineworld’s share price looks mega-cheap right now. The penny stock trades on a P/E ratio of just 8.9 times for 2022. It packs a meaty 4.8% dividend yield for the new year, too. But despite these attractive numbers I won’t be buying in: Cineworld’s shares are cheap for a reason. I wouldn’t be surprised to see Cineworld’s share price fall all the way to 0p. So I’d much rather buy other cheap UK shares for my portfolio today.
https://www.fool.co.uk/2021/12/29/cineworlds-share-price-is-dirt-cheap-should-i-buy-in/p

I too can see the share price potentially going much lower - debt far exceeds market value so technically 32p a share is far from cheap.

Funinvestor, I'm very short on time was hoping for a quick answer! Net asset value = total assets - total liabilities. We all know net debt is over £8bn. If total debt is greater than total assets, would you agree from a nuts&bolts perspective the share price would be worth 0p or thereabouts?

Does anyone know the current net asset value of the company? Or just the total asset figure? Just trying to work out how close to 0p the shares are currently worth

Cineworld's net debt at the end of 2020 was $8.32 billion, more than four times its current market value.
https://www.reuters.com/article/uk-cineworld-results-idUSKBN2BH0S5

It's not difficult to see why shorters are all over it.

I admire your optimism Ian and I wish holders here the best of luck. I would forget all thoughts of a takeover though, it ain't gonna happen.

Lose the appeal, and there's a very real possibility Cineworld could go into administration. As Motley Fool stated, the company would have to add more debt to the debt mountain in order to make the payment and I suspect that would be the end for the company. The downside risk, if the appeal is lost, is potentially shareholder wipeout. Win the appeal though, and this should comfortably jump back above 50p and probably go on to recover somewhat possibly back into the 70s or 80s. Personally I don't think the appeal will get anywhere but it'll be interesting to see what happens.
Cineworld is unlikely to be a takeover target, no matter how low the valuation goes. Because no company will be willing to take on the debt pile. It's far better to leave a company to go into administration and then acquire the assets free of debt at a knock down price in a fire sale.

Boom or bust
https://www.fool.co.uk/2021/12/18/are-cineworld-shares-going-to-zero/

Mooky did a stupid thing trying to acquire Cineplex at a time when the company was already up to its neck in debt. When you're in a lot of debt, the last thing you do is go on a spending spree. The situation the company finds itself in today is due entirely to mismanagement.

Guys, guys, guys. What's far more dangerous to holders and in particular, to new investors considering buying in, isn't pessimism in the face of huge debt and losing a massive court case. Its over optimism aka ramping. The appeal could go either way. The share price is unlikely to recover whilst this appeal is ongoing as uncertainty remains and the market remains skittish about the outcome. That is why I believe it's most sensible to stay out of here if you can, until at least the outcome of the appeal. You could buy now, Mooky could win the appeal and absolutely, the share price would no doubt bounce back to 40/50+ however, if he loses the appeal, the price could easily fall into the teens. Some say you have take risks, well yes you do, but CALCULATED risks, not wreckless ones.

Mountainous, I won't tolerate bullying on the forum. And I will report you so be warned. I'm open and honest enough to state I'm on the sidelines here. I'm watching with interest because in the unlikely event the appeal is successful, I'll be in. But as I've said, I can't see it happening. I'm stating an honest opinion on a chat forum my friend. That is all.

If the appeal fails, the share price will likely have further to fall, possibly much further. Personally, I can't see the appeal getting anywhere, I think Mooky is just playing for time. I wish holders well here and I'll continue to watch from the sidelines, but this is way too risky for me to even consider dipping my toe in. If the appeal is successful, that'll be a different matter, but I just don't see it happening unfortunately.

Regards Mooky and family being major shareholders, some have said "they won't let this fail, they'll look after us shareholders" etc. Not sure if you can draw comparisons, but the same things were being said on the Koovs board about Lord Ali, the mega rich major shareholder of the company and founder of ASOS. He'll look after us, they said. He won't let it fail, they said. Well he did neither. What he did was allow the company to go into administration - wiping out the shareholders in the process, incredibly, he then bought the assets at a knock down price, free of all the company's debts, and took the company private. Not saying Mooky might do the same, but when push comes to shove, it's their own interests these major holders are primarily concerned about. The well being of small shareholders isn't always taken into consideration. It's just a word of caution, that's all.

Everyone said at the time Cineworld was over-stretching itself trying to acquire Cineplex. Mooky made a bad decision and it's ended up costing the company dearly. Cineworld won't be a takeover target because nobody will be willing to take on the debt pile, so it's either got to somehow pull itself out of this, or there's a very real risk of the company going into liquidation. Assets would then be sold off to circling vultures at a knock down price, shareholders would probably be left with nothing.

Not sure how many cinemas are freehold, but maybe the only way out of this will be to sell off part of the estate to reduce the debt pile? They would end up a smaller company but with less debt and they could always build their estate back up?

Sorry guys but this is the news none of us wanted to even contemplate. I hope the company somehow manages to shrug this off, but this isn't just bad news, it's a financial hammer blow.

Boris is a lying, hypocritical globalist shill who's hellbent on destroying the economy so he can "build back better" all part of the great reset agenda, destroying capitalism and replacing it with socialism. "By 2030 you'll own nothing and be happy" strange how zero Omicron deaths have been reported worldwide, then just as he's struggling with booster uptake, lo and behold somebody just happens to die with it.

Has anyone heard any more news on the Cineplex court case? I'm not seeing much info online. Does anyone want to hazard a guess when it will be resolved by? Next summer maybe? Both are suing eachother for substantial sums, so I think it's fairly obvious that's whats causing the decline - yes the latest covid-variant-scam will also be a factor but I don't think it's the main reason for the decline. Cineworld is doing pretty well apart from that, clearly demand for cinema remains very strong. The crucial thing is the court case is ruled in Cineworld's favour - Cineplex forced to pay Cineworld substantial damages would make the share price rocket, it'd remove all the uncertainty and every man and his dog would be piling in. I guess we'll have to wait and see how it pans out.