Member Info for Hexam

HC - Likewise, but I didn't expect it to be quite this acute with Argo. I expected them to raise some money via loans and/or equity to pay for the 0.9 EH of intel rigs (they said they needed $25-35m) to get to 4.1EH as well as a bit extra to 'tide them over'). They also said though that getting more loans would be no problem given the established and great position they were in (but now PW is saying getting more loan funding is nigh on impossible - why do I ever take any notice of what Alex says)!

Instead, they are now raising cash on very poor terms just to tide them over - and at 2.9 EH not 4.1 EH. Horrific.

Again inaccurate. That’s not how it works here. Current sp is irrelevant.

“I don't see where the growth comes from now.”

AB - I think you’ve hit the nail on the head. The actions (if implemented) buy them time. Certainly enough for at least a year but seems to wipe out any prospect of growth in the meantime - they’re just treading water surviving on 2.9 EH, plus some hosting income, and have a much lower platform when things do turn than the 5.6 EH they we’re talking about only a few months ago.

I’m assuming in all this the intel rigs are on hold as most of the new money would have to go on these rather than surviving - plus they’d be paying much more for them than they got for the ones they are now selling?

“Looks like the dilution will be the biggest issue here. If they issue 5 x more shares and this drops to 0.5p.”

I hope you’re right as just 5x would be a huge win from this process - and certainly the sp would be much, much higher than today’s sp (let alone 0.5p) if we come out of Chapter 11 successfully and this was the only dilution. So loving your optimism :)

"PPA is the main reason."

Sorry AB - but I really don't think it is. It's definitely important and costing maybe a few million a month - and would on its own have kept them from having to go around with the begging bowl. But in financial terms not doing an earlier raise and not selling at highs the BTC they are being forced to sell now have both cost them more. It's too simple to put all or even most of the blame on one thing. These are the big three though in my view along with generally overstretching themselves.

They can still get a PPA but any raise is now going to be much more painful (as we've seen today). Hopefully BTC will turn back up soon in which case they can lick their wounds and try and get it right in the next bull run so certainly all is not lost.

HC - Agreed. There was a lot of misguided and ill-informed pressure from shareholders, including plenty on this board, against any further dilution just like there was about selling BTC when prices were much higher and everything looked rosier. Had he done either of these things though, or got the PPA in place, they wouldn't be in this position. Managing the risks of the company should come ahead of trying to please shareholders - and this I think this has been his biggest issue. Having a chairman in place to lean on would I think have helped but was another thing he failed to do.

The DIP loans are secured loans and they rank ahead of all other claims (both secured and unsecured) - this is mentioned clearly in the court docs that describe their 'superpriority' status. The DIP lenders are at the front of the queue and hold the most influence in this process. Banks, and others behind them in the queue, do not have any power to 'kick this down the road'.

"Hoping the mining update is decent to get us back over 40p."

The mining update won't have a big impact on the share price, one way or the other, it never does - unless some big news is also tagged on to it which can always happen of course.

Besides the figures themselves are unlikely to set the world alight. They should hopefully beat last month's number (with the increase in machines and lower curtailment offsetting the increase in difficulty) but I can't imagine it will be by much unless they've finally found another gear regarding efficiency. Otherwise it's the sold number that may be more interesting and whether it is much more than they've mined in the month. There may also be news on funding for the intel rigs and/or paying off the Galaxy Loan completely? Update on hosting arrangement? How about a chairman - finally?

"are you referring to the 20 cinemas that the rents were extortionate and getting out of those leases saves Cineworld $12,000,000/ month.. those 'closures' I can live with..."

It's sensible to stop the rent on unprofitable sites and it's now 26 cinemas with a total saving of $17m (though not per month).

I can see how this ends up as zero (actual bankruptcy or the lenders taking all equity in the business). Hopefully not the case!

I can also see how the share price could end up well over 10p if dilution is not that great or, by some miracle, is avoided altogether (in which case 10p would be absurdly low). Fingers crossed.

If there is ‘heavy’ dilution then around 2p-10p seems very plausible depending on just how severe that dilution is.

The one scenario I cannot see is that there is a dilution that leads to 0.5p. Even if we’re only left with 1 share in every 100 it is still likely to be worth more than 0.5p. That would value the company, with around 140bn shares, at less than $1bn.

For a low debt CINE with no worries about going bust that is a stupidly low valuation and if the creditors only thought it was worth that much they wouldn’t even bother with this whole Chapter 11
process.

In other words if we get none of the cake we’ll end of with nothing but if we get at least some of the cake then 2p SHOULD be around the minimum - assuming of course cinema in general has a profitable future. Anything much lower than that then for me the maths and the logic just falls apart.

Interesting nuggets are only nuggets if they are right - but too often he is not. It’s good that he is trying to bring people together and he does seem enthusiastic and sincere but if he planned these sessions a bit more and researched them a bit better I think they’d be far more useful.

As it is they are biased, often incorrect and he wastes time waffling and also looking for things that aren’t there that he could have easily checked were beforehand.

It’s hard to take this guy seriously when he says the “the six months to June were profitable…it was just H1 that was not profitable”.

He said this piece of comedy gold after misreading admissions, or some other revenue numbers, for profits up to June.

Most of the rest of the 40mins was just waffling plus a bit more of his dodgy views on dilution.

But of course he’s more popular on this board than Wolf for example as this guy clearly loves CINE and says more of what people want to hear whereas Wolf understands financials a lot better and is (in my view) much more objective.

But clearly there are some that only want to live in an echo chamber. So I guess bladerunneruk will soon be proudly announcing to everybody that he has filtered me as well (if he hasn’t already).

I was comparing to H1 2019 Wolf as the last two years are so distorted by Covid/closures (and as per the original question).

@HNS - Agreed. AMC for example break down their revenue and particularly their costs in a much more transparent way.

Wolf - it looks the average revenue per admission has increased from $15.80 in 2019 to $18.30 in 2022 or 5% pa so I don't think the issue is there.

As I said earlier I think it is just economies of scale on the cost side (and possibly higher cost inflation than revenue inflation). Whatever the reason, in total the direct costs (cost of sales) have gone up from just under $10 to over $13 per admission - around 10% p.a. - and double the rate of increase in revenue. To me it is this that looks high rather than revenue increases per admission being low.

Revenue was up but not by as much as they expected or needed. Yes, they can generate revenue but they are not generating enough to make a profit at the moment and are still burning cash. Of course the other thing is that the headline results were already public weeks ago.

Hi FP - I think the margin when it was set up was 30% i.e. they could get a loan for 70% of the BTC backing it. So for a loan worth 350 BTC they would need around 500 BTC as collateral including the margin. Of course that may have changed but I don't think they'd need to hold double?

I agree though that they will be forced to pay it off soon to release the margin - whatever it is!

FP - they had 854 BTC not with argo labs last month but I don’t think as many as 700 are needed for the Galaxy Loan. That’s only $6.72m now (assuming no more has been paid off) which I would have thought needed around 500 BTC at most?

So they’ve perhaps got 350 spare - or maybe close to 500 if they pay off the Galaxy loan completely. Either way, not a lot.

Also what they’ve mined this month will have all gone towards costs.

Depreciation doesn’t go through ‘gross profit’ but further down instead.

I assume the dividend suggestion was a joke?

I suspect it is mostly down to the usual thing with businesses i.e. economies of scale. Even within gross profit there will be a significant element of relatively fixed costs such as staff and presumably part of the payment made to studios for films?

In other words if revenues increase/reduce then costs usually don’t increase/reduce as much.

Cost inflation may also be higher than revenue inflation.