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The court verdict hit me hard and I sold in panic at 32p. Still with big profit overall as my average was in 40s when I bought in last year and had sold bit more than half my position at around 100p last year. And then I got lucky. I decided I still believe in cinema and when I sold CINE I put it in AMC around $24. It went up to $31 very quickly and I sold half there. I had gained by confidence back in CINE by then (thanks to this board) and I got back in CINE with some of that money. Then AMC dropped and I sold rest of my AMC position when it hit my stop loss at $25. I am now in CINE with average of 33p and some cash left to deploy.
If it drops below my average I will buy, otherwise I am happy with where I am and watching this rise in next few months and years. I don't need this money back now for at least 3 years so I am real LTH.
CINE has been very good to me and I have made life changing money over the past year. I am not watching this board regularly anymore. Thank you everyone for helping me. And all the best!
People will know from my sporadic post here that I am holder in Cine share. Lot of people posting they are selling. So I wanted to say I have started buying again. If it goes down further will keep buying. Sure this is volatile and risky share but we already know that from when it hit 16p. If you cannot handle the risk, you should not have bought in the first place. I hope you will buy back again when you have thought about this a bit more. Good luck and all the best!
AMC has different things driving the price action. Anyone buying based on performance and fundamentals and results is not going to go near it with price at $45. You can't justify that price even if cinema was better than 2019. So you can't correlate price action before or after results announcement to the results itself. As cine LTE only thing to take away from AMC result is quiet confidence that things are heading in right direction and patience is needed.
I am curious to see what you all think is better outcome for next 12 months:
1. Judge rules in favour of Cineworld in which case I think probable that Cineplex appeals decision and we are back in court for next year
2. Judge rules in favour of Cineplex and awards $75m in damages and both sides accept ruling
This is all hypothetical of course but I was curious which of these outcomes my friends here will prefer :-)
Mr D'Souza deserves all the money that Cineplex will pay him after the judge finds Cineplex has to pay Cineworld's litigation costs ;-)
All in my opinion!
I won't be able to watch post this 20 min stoppage, so relying on my friends here to relay how the arguments do on damages. Thanks!
I have never heard of a time when one firm pulls out of merger/acquisition accusing other to break contract and the other firm doesn't sue back. So you are absolutely right, Cineplex would have sued irrespective of merits. And as Cineworld counterclaim is not billions of dollars they are ok with rolling dice and see if by some miracle in discovery or later in trial they chance upon something that takes them through. The downside for them is small.
As others are noting, Cineplex argument in closing is that pandemic is not in MAE clause, so deviation from covenants is allowed in pandemic as it is not listed as a materially adverse event, as long as similar action is taken by others in industry.
Cineworld lawyer did good job today in showing case law texts and examples to make clear that covenants don't just apply in materially adverse events. I also thought his response to judge when she questioned with broader scope of MAE was very good.
But let's see some covenants in arrangement agreement. I have picked 4 example from the agreement to make my point:
- Cineplex can't sell equity
- Cineplex can't raise one more credit facility
- Cineplex can't give its management any bonus incentives
- Cineplex must operate in ordinary course.
In the agreement all 4 are at same level of priority. Either all 4 should apply in pandemic or none should apply.
Let's consider the first 3.
- During pandemic, AMC sold equity worth $230 million
- During pandemic, Cineworld raised credit facility of $250 million
- During pandemic, Cineworld gave management bonus incentive.
So does that mean Cineplex was also allowed to do all that as well? No one can rationally come to conclusion that within the bound of agreement, Cineplex would be allowed to dilute its stock, or raise more credit or give its management more bonus because it was pandemic.
And if it is not allowed to break those 3 covenants, then surely is not allowed to break 4th covenant either. All four covenants have the same bounds. Quite clear then that Cineplex is not allowed to break ordinary course covenant just because it is pandemic.
Hence proved!
All in my opinion of course :-)
I suppose it is possible that lawyers come in tomorrow and say they are come to agreement out of court. This can happen in trials, when all arguments and evidence is laid out and both sides can again evaluate their risk of losing. So it is possible.
But in my opinion it will not happen. Mooky is not going to offer price Cineplex will find acceptable, especially after tricks they did to hide their debt. Trial showed there is bad blood between firms now. And on other side even if Cineplex think their case is weak, I think there isn't big downside to rolling the dice for them and see what judge says. Even if they lose and have to pay damage to Cineworld, it is not billions of amount. Cineworld is asking for a much smaller sum than Cineplex. For all this reason, I don't think Cineplex will come to table for settlement.
But if they do, then great. We get this court case behind us and shoot up!
As some people are asking...
The court reconvenes tomorrow from Nov 1 to Nov 3, for 3 days of closing arguments. That is the end of arguments and presentation of evidence, only thing left after Nov 3 would be for judge to deliberate and give judgement.
Some people are expecting judgment in Dec but that is in no way confirmed. This case is anyway running late from original schedule. We will get some indication from the judge on Nov 3 of when she expects to be back with her decision. It could very easily be Jan as well.
If anyone want to follow, links of zoom telecast for next 3 days are here
https://www.ontariocourts.ca/scj/cineplex-v-cineworld/
No more court now until Nov 1st. In the meantime the lawyers submit their documents and the judge reads and rereads the documents and witness transcripts. Then they come back for 3 days of closing arguments on Nov 1st. The judge said she expects to have lots of questions and it will be interactive. That can get really interesting :-)
I will try to explain how civil litigation works. In civil litigation such as this one, the judgment is not in terms of common sense fairness. It seems fair to us that CW should be able to pull out, it will not be so simple for the court. The court will judge based on the letter of the contract only and who in the contract bears the risk or reward of the unexpected.
For example, suppose CP found $20b hidden under a rock in Feb 2020. Can CP pull out saying price is too low and CW should not get the reward of this unexpected occurrence? Similarly if pandemic happens who agreed to bear the risk of that in the contract?
The contract says CW has agreed to bear the risk of pandemic but only if CP operates their business in ordinary course of normal operations, consistent with past practice. CW says CP did not do this. CP says they did. They argue on what "ordinary course of normal operations consistent with past practice" means. That is the crux of this court case.
The contract does not refer to what other cinema firms do anywhere, all of that should not come in play and just smoke and whistle.
All of above is my opinion only. Closing arguments next week will tell us where the two sides have finished building their forts.
Haha! You can put 2 and 2 together perfectly, mountainous! Now I know how you have spotted the Cineworld opportunity to be invested here :-)
I actually agree I am far too high at $150m. I have added lots of contingency for absolute worst case and as you can see even then it is nowhere close to the $2b Cineplex is asking.
Only 70-90 people are watching court case everyday. Many of them are on this forum. It is safe to assume maybe that the market has not realized what the court case is bringing out. Let's hold our LTH until they do!
Judging by this court case and evidence presented, I am bit surprised this didn't get settled before going to court. I feel maybe there is too much loss of trust now and I will be surprised if they have another acquisition now. If any settlement comes before judgement it will be only to go separate ways.
Finally wanted to correct something I said earlier. In reality if we do get worst side $150m payment to make, that may not even result in stock price going down. It is still a great outcome. Currently we have uncertainty of this court case but I will say that Cineworld case is stronger than I had thought before case started. Market hasn't realized yet downside risk is greatly reduced from court case. We only have to hold LTH position and wait for market to catch up.
Thank you for your kind words bonkers0801. I will say again that I am not a lawyer or a judge but only speaking from experience as courtroom observer for civil litigation. Also I have seen a lot of Cineworld Vs Cineplex on the weblink but not all of it. I don't have access to court documents to revisit and reread.
I am invested in Cineworld but trying not to be biased, however I will maybe also list downside risk for your benefit.
1. Canadian courts do not have local cases as precedent and so judicial position is not decided of whether ordinary course should mean something different in extraordinary times. This judge is going to set the position for the first time and there is risk in that.
2. Evidence is trying to paint picture but from my experience of standard required in this type of litigation it is not slam dunk. Judge has to adjudicate and form opinion. I personally think evidence is enough but judge has to decide.
3. As per agreement Cineworld could terminate agreement if Cineplex has breached but only if Cineworld itself has not breached. Cineplex has said Cineworld has breached by not pursuing regulatory approval in good faith and delaying their submissions. I don't think they have proved that but judge may think otherwise.
4. Cineworld has shown Cineplex modified material contracts and leases without asking for permission. Cineplex has argued these were commercially reasonable and possibly required by law, and since Cineworld was non responsive, permission was implied. I don't think this holds at all but judge might think otherwise.
Finally you can see it all comes down to judge. So let's assume worst case she finds all decisions in Cineplex favour. Then what? I think damages can surely not be more than break fee + transaction costs + lawyer fee. All in all, no more than $150m to be paid in absolute worst case.
The documents in this court case have shown how well Mooky and team guard their financial situation and make sure financing is ready well before they need it. I won't be surprised if they have already sorted this for worst case before any judgement comes.
If that decision happens for $150m, which is worst case if everything goes against Cineworld, I think any stock price dip will be temporary and a buying opportunity for Cineworld LTH :-)
I am not a lawyer but have some experience in reporting in civil litigation, though not in English/US/Canada jurisdiction. It is not slam dunk case on either side as it depends on interpretation of contract for a situation the contract does not explicitly cater. The Canadian court have no earlier cases of similar type to look up in Canada for reference.
There is one AB Stable case earlier this year in Delaware which Cineworld lawyer also mentioned in opening argument, that case was decided in favour of buyer so that is good point of reference. Someone (I am sorry I forget who) on this forum referenced it too. Canadian court do look at US case law for precedent. Looking at Stable case, the contract wording for ordinary course and pandemic issue is very similar to Cineworld case. It is about a hotel chain being acquired before pandemic and then the world changed. Similar issue of seller changing its business practice is in play.
Civil litigation is usually very much about documents and decided by a judge. So it is very focussed on documents and less on specific way evidence is presented. Jury can be swayed by how evidence is presented but judge usually have experience to look through it. Judge will interpret wording of ordinary course clause and decide.
My opinion is that she should favour Cineworld.
By the letter of the agreement, Cineplex needed to stay below 725m on their credit facility only. So they may be okay there. But Cineworld are asking the judge to take their actions of forgoing supplier payments, rent etc into account that they did to try and keep the 725 in check. Cineworld says they deviated from the "ordinary course" covenant, which says they should run the business consistent with past practices.
You can see in Cineplex announcement last year that cineworld had pulled out voting breach of the ordinary course covenant.
https://www.newswire.ca/news-releases/cineworld-repudiates-transaction-to-acquire-cineplex-852821495.html
Cineplex doesn't have to prove the 725m breach. Proving breach of ordinary course covenant is enough.
On the other side, it is important to note that as per contract, a party can terminate if it's not breaching the agreement themselves. Cineplex is arguing that Cineworld was also in breach (by not proceeding with getting regulatory approval as soon as reasonably possible) and so they have unlawfully terminated
It is definitely not straightforward but Cineworld case definitely is that Cineplex moved away from ordinary course before pandemic came into picture.
That is why they have email chains from Jan etc from Cineplex people that say "Star wars has flopped I lie awake at night thinking of 725 let us stop paying suppliers and rent". The email chain in January does not say "oh no pandemic is coming let's stop paying suppliers" Cineplex have not shown any document showing Cineplex management were thinking of pandemic at that stage. No board discussion, no emails, no internal presentation.
Hope judge pays more attention than the reporter writing that article. But you never know how she looks at it. I have no legal training. As long as she doesn't give billions in damages, it is fine.
I am cine LTH from last year with average in 40s. I sold part of my holding earlier this year for good profit and am holding rest for few years. It is still big money and I am certain it will be much bigger pot in few years!
I have been watching court proceedings regularly and read most posts here though I am not often commenting. To all new LTH I say that you can maybe take heart from my experience. I averaged down by buying when cinemas closed and everyone said cine is going under. For months it felt like I had lost my money. But I got much profit from cine. Have patience and it is worth the holding!
I gather this from court case:
Cineworld case is that Cineplex violated 725m debt ceiling and went away from ordinary course to try and stay under. They also took material decisions regarding lease etc without cine consent. It is a simple case and Cine lawyers are putting in evidence showing this. Cine found internal emails etc in discovery that show this is likely the case. This violates agreement in letter and spirit as it leaves Cineworld with the cheque while Cineplex has its lunch.
Cineplex case is that cineworld was not trying in good faith to close agreement and was not aiming to close. In their case they try to piece together story for proving this. They try to show cine investors and banks were concerned about Cineplex deal and they try to show cine was delaying. However no matter how much they try they are not finding much documents or internal communication to show cine management was aiming not to close. In fact it seems clear Mooky really wants to be number 1 cinema and wanted to close. So they are playing dirty and also trying to discredit Cine management by showing Mooky deadline interview and hinting in their tone that cine are dishonest and maybe are hiding documents. Cineworld lawyer is objecting whenever they go too far with this. I personally think he should be objecting more. Maybe they think judge will ignore the theatrical stuff and so are not bothering.
I have no legal training and I am maybe biased with my LTH position but the case arguments are almost over and I can't see how Cineplex can win damages! And surely massive bump in price if court case goes away. Hold strong!