The latest Investing Matters Podcast episode featuring Jeremy Skillington, CEO of Poolbeg Pharma has just been released. Listen here.
Anybody who thinks exhibition is on the way out doesn’t know what they are talking about. This is what the future looks like. This is the model: (https://www.youtube.com/watch?v=qG_O68ocvnM) Only thing is that the streamers just haven’t got there yet. But they’re on their way. Because they are starting to realise that although there is scale in streaming, there’s no profitability. Unless you are Disney……maybe. And if YouTube knows this, then Mooky knows it, so does Adam Aaron. And we already know that the big studios are catching on. Netflix will soon get there too. So for exhibition, the pandemic is a good thing. It helps us get to this model more quickly than we otherwise would have. So for CINE and their creditors, the path of least resistance is extend and pretend for 12-18 months longer til we get to the model. Then exhibition, the locomotive that pulls the train, will likely be more profitable than its ever been. IMHO & DYOR love your work ian harding
Hi Pawelbek, I read your posts with interest, and I don’t understand why people filter you. I’m a long term holder and cinephile who, I suppose, should probably be more concerned than he is about Cineworld, but its difficult to motivate myself, and afterall the virus is ultimately just trying to live like the rest of us, and I just love my unlimited card. But if you were someone who is less concerned than he probably should be, when would you say that person should buy Cineworld again, would you buy it? Would you wait for a price target or would you target a public health outcome?
Actually, I’m strangely not that bothered. I remember the days when this Bulletin Board might receive one post every fortnight. I think the issue is the court case/ acquisition of Cineplex. As a LTH, some context: this share was shorted from about 300p in mid-2019. At the time, I couldn’t understand why. Cinema was having a great year at the box office, CINE was rolling-out ‘Unlimited’ in the US, which is far superior to AMC A-List and something consumers in the US had not seen before, so I reasoned that there’d be a chipping away at the debt, and so what was the problem, I thought???? I just didn’t get it. But it was the Cineplex deal. No one was to know. The shorts must have caught news of it and they shorted CINE to about 210p. Then Mooky bought in, as a great leader does, like Caesar running to fight in frontline to rally a faltering legion. Still, the shorts had a bit more of a go at it, down to about 190p. But when Mooky announced that the Cinplex deal was debt funded, the price shot-back up. I suspect the shorts thought there would be a rights issue which was why they attacked. But there wasn’t and thy charged for the exit. Now, that deal was announced in late December 2019. Of course, we all know what came over the Horizon after Xmas 2019 and the shorts came back and share price sank accordingly. So, now we are in a place where COVID is behind us, and the big plus is that the nagging, tired and now completely discredited narrative about the death of cinema has been put to bed. Ironically, COVID helps us here going forward in a big way. Whatever doesn’t kill me…..etc... So the only thing that remains is the Cineplex deal which was the reason that the shorts came along in the first place. In my view, this issue is the heavy diving belt that’s keeping us on the bottom. If we can throw that off, (maybe November) I’d expect a quick eardrum bursting rise to the surface. The only evidence I have for this is my narrative, a process of elimination of the other issues, and a hunch. So if you’ve got in under 130p, I think you have done extremely well IMHO.
The drop is irrelevant. I do hope some fund manager is silly enough to be shorting it because they are going to get burned.
https://www.youtube.com/watch?v=Jn5pJsnnNnc
It's also worth watching his Plot Twist tag.
........ (cont.) but I am speculating on that last point. And the day and date release might even help diversify content at the box office, make cinema subscriptions more attractive, but this is more speculation. Anyway, didn’t expect to post today, just thinking out loud in a rather interesting world. Actually, someone should copy paste this to Wall Street bets, try put the hedgies feet to the fire on CINE. I’m seriously over the shorts.
IMHO the fundamentals are good for CINE and good enough for AMC. Sure, debt is way up, but this is a pandemic for goodness sake. Anyway, Pre-Covid, groups like CINE were already heavily beaten down by shorts fearing the acquisition of Cineplex, which, when they discovered was 100% debt funded, they considered a ‘good move’. Covid fears hit the SP about 3 weeks after the announcement. Big things are that studios have also held back blockbusters. The money in streaming isn’t good enough. Experiments with WW1984 and Mulan have failed. HBOMax hasn’t generated enough subscribers to justify the loss they will take on the 2021 slate. And who needs more than two streaming services anyway?? ATT are dreaming. More than that Paramount didn’t sell maverick, Bond didn’t sell either. Further, to all the Hollywood bigshots, cinema is premier league, streaming is division 1, probably 2. People in the industry want to play on the big screen, not in Valley Parade Bradford. Again, there’s a growing realisation that streamers compete with Cable TV, not Cinemas. Streamers are just non-linear programming behind a paywall. The highest rated shows on Netflix were NCIS, Greys Anatomy and US Office, basically all garbage for goodness sake??? Cinemas create serious pop culture ‘events’ necessary to generating interest, merch and spinoffs like Mando, awesome, and which was only about the 7th most watched series. AMC and CINE also have a subscription service, and CINE Unlimited is awesome. Again, Cinemas enable multiple sales of products, which is why paramount did not sell maverick. Basically, cinemas are the locomotive that pulls the streaming and merchandising train. IMHO Covid will reverse long term investor sentiment on cinema chains. The inability of something as big as COVID to kill cinema will make cinema stocks proportionately stronger. As the great man says, whatever doesn’t kill me makes me stronger. Above all think about Gamestop and AMC, these are ‘everyman sectors’. Ordinary punters on the street, people like me, are into video games and movies and streaming. We understand how these industries make their money because we pay for them and then we communicate our understanding of them and inadvertently bust shorts, probably by accident, because we are on Bboards like this one. I suspect that those hedge funder-swells are a bit lazy in this regard. I don’t think they understand the way that these sectors of the market actually work. They likely think they’re too good to wear a Star-Trek shirt (not discovery obviously) or go buy a baby yoda plushie from Gamestop and give it to their significant other for xmas. They probably don’t know gamestop sells this stuff. And if this wasn’t enough, in my world, there is no COVID about and the cinemas are busy-basically, there’s nothing else for average Joes to do. I actually think that the closing down of Regal might help the industry put the 90day window back together.....
I'm now convinced it's about the theatrical window. What I don't understand is why AMC caved-in.
https://variety.com/2020/film/news/amc-universal-deal-entertainment-industry-future-1234718942/?cx_testId=49&cx_testVariant=cx_1&cx_artPos=0#article-comments
Again, tell me I'm wrong. I'd like to be wrong. But this seems much more of a concern than COVID. And it explains the shorts, they caught wind of this and acted. it's what they do.
I appreciate the input on this thread, the collective efforts to calm me, but the news of the Universal/ AMC deal did send me into something of a fit last night, and now this drop occurs today. Are we sure we are not missing something in regard to this deal. I get the idea that it gives Universal the right to take failing Tent Poles out of the cinema and put the on VOD, but are we sure that this is how we ought to interpret the agreement.
This, it seems to me, is the exact kind of info that shorts acquire beforehand and act upon. I am just drawing to attention to correlation between the deal and the drop, I'm not competent to assess causation, but are we sure?
I can’t see how this deal is anything but really really bad for CINE.
If it’s a good deal, then why didn’t Universal negotiate this with the whole industry? Why are the details of the deal being kept confidential? It seems to me like AMC has sold out the entire industry? Why? It makes no long terms sense. They have made their issue with Universal, the industry’s issue.
The shortening of the window to 3 weeks affects the business model, surely? How can we guesstimate revenues at this stage? How can we guesstimate the way consumers will react to such a narrow window? Will they come? How are the long term institutional investors going to react?
It’s clear to me that the shorts were never about the virus, they were never about a rights issue, they were never about balance sheet concerns. They were about this. They must have caught wind of it. To me, this seems worse that the virus or the cineplex deal. What surprises me is that the shorts were only at 8.5%. For something like this they should have been >13%.
I put all this out there with the hope that someone will shoot me down in flames. Please do so. Be as abusive as you like. I would LOVE to be smacked down. "Speilgood you're an idiot" this how I would like to be addressed.
I do have faith Mooky, however. If anyone can sort this, he can.
Your story moves me. So just to offer some support, advise you to stay calm, say that I think you’ll easily double your money come next year and offer some reasons as to why I think this way, which you can take or leave. But don't sweat it.
I have watched this BB for a long while, only signed up to comment when the shorts first emerged around this time last year. I didn’t get it. It was the Cineplex deal. But no one else here saw it either. Incidentally, I remember when this BB was lucky to have one comment per week. Now the day traders are all camped out on the lawn. Noisy. But their being here is a positive sign. So a welcome to all
Anyway, I had difficult conceptualizing COVID too. I’m not an epidemiologist. I didn’t see it coming on this strong. I didn’t see the shut downs, or CINE falling this far. But I’m not worried. I’ve averaged down and I’m happy to be here. At 90 entry, I'd venture you got a good deal. Why? Because given the nature of my work there are subjects that I do understand---all too well. IMHO CINE is a fall-out shelter for the approaching catastrophe of Brexit. It’s a recession proof FTSE stock that denominates in USD. COVID is an inconvenience. It lowers the cost of admission to the shelter. If you think the COVID shut-downs were bad, wait til you see Brexit. COVID is a public health problem that science will eventually stare down. Brexit is a political problem that will likely end in violence. So I’m more worried about Britain than I am CINE. Because as a political concept, Britain might not exist this time next year.
To the day traders out on the day, maybe keep the noise to an acceptable level, there are Remainers in here trying to sleep
Indeed. And so should the UK and the US government close the cinemas, this a positive. Should the studios delay many more tent pole films, this is also a big positive. Read the articles again. CINE will talk to its creditors. With 5-10 tent poles in their back pocket, and summer box office around the corner, the creditors will make an arrangement. Because the studios need the cinemas. And all the tent poles are in the can. And because people will also return to the cinema much more quickly than they will book travel or a cruise. With government closing the cinemas, this will only help CINE make their case to the creditors. On the downside, the creditors might have their own eyes on that promised dividend.
Maybe I should have shorted it too, but strangely, I can’t seem to get that worried about it. For mine, people aren’t thinking very hard about things, it’s like they’ve watched too many movies, people with corona virus don’t start feasting on other peoples’ brains? Maybe I’m missing some important news this morning, but the thing is CINE’s flagship product is Unlimited. It’s the backbone of their business. It’s the product for which they are justifiably famous, the product of which AMC A-list is a poor imitation. So, when a person joins Unlimited, they commit to paying one year’s membership. It’s different to A-list. It doesn’t matter if subscribers don’t show-up for six months, they still have to pay. And interestingly, Unlimited only launched in the US in July 2019. In a worst-case scenario, if the virus does cause people to eat each other’s brains, then the uptake-rate of Regal Unlimited could be important, 12 months grace for CINE while the boffins try to stop zombie virus. Cineplex doesn’t have a subscription program at the moment. This is a problem, sure. But even if they close cinemas, they’ll only close the ones near disease clusters, not the whole network. The US is a big country. Maybe numbers will drop, but subscribers will pay. And anyway, so when a person holds their Unlimited for a year or so, they gain VIP status, which delivers feel-good perks, which really do feel good, no one wants to lose them. So new starters to Unlimited are locked-in for 12 months, and then why would anyone who has decided to go on with the subscription, and who is a VIP, cancel the whole thing because of some virus that’ll be gone in six months. You’d just hold, maybe you wouldn’t go, but you’d still pay. And anyway, the best time to go to the cinema is when there is no one else around. This virus is a problem, but its not the end of the world. People just aren’t thinking. .....and, yes, I have seen that thing on YouTube too. What kind of an accountant posts random opinions on YouTube, really?
Yes, thanks to all. I particularly enjoyed Peterson’s construction of newly minted MBA hedge fund analysts, which I still find compelling. Although I would have liked to have added about 3 days later than I did, I’m reasonably happy with where I am. I think Peterson is also right about the next 12-24 months. Beyond that, I see CINE as a solid but beaten-down recession-proof defensive that gives me the US consumer and keeps me out of GBPs. No spot is ever perfect, but all things considered I’m happy to camp here.
Yes, very interesting story about SKG. And Netflix does seem to have a rather high valuation at the moment. I'm not ready to put money into it either. CINE is a hold for me too. I'm just a little sensitive about the shorts because I thought I'd be clever and put a little bit more on CINE just before the 'sell' note from Morgan Stanley hit the airwaves. But who can predict these things.......
Actually, the shorts aren't really about all that, providing we can trust the Tory-graph. And cinemas are widely known as recession proof and, I'd submit, for the reasons I've outlined. But check this. The shorts seem to be are about the Greidingers more than anything else:
Cineworld owners refuse to be frozen out by short sellers
30 NOVEMBER 2019 • 8:00PM
The Israeli dynasty behind Cineworld has hit back against an attack by short sellers, insisting the chain has the “full support” of Singapore’s sovereign wealth fund as it pursues American expansion.
Hedge funds have ramped up their bets against Cineworld, which is due to issue its crucial pre-Christmas trading update this week.
They are taking on the Greidinger family, who own 28pc of the FTSE 250 company, and two years ago borrowed more than £270m from Singapore’s GIC to help fund the £3bn takeover of US multiplex chain Regal.
Cineworld issued new shares and GIC’s support allowed the Greidinger family, led by Moshe, who also serves as the company’s chief executive, to maintain their grip. However, hedge funds have bet £500m against Cineworld, equivalent to 17pc of its shares.
A slump in their value has fuelled speculation that GIC could demand more collateral, as the Greidingers’ loans are secured against their stake.
Short sellers are hoping they will be forced to cash in shares or that the strategy developed by Moshe will unravel as the family fortune comes under pressure.
A spokesman for the Greidingers’ holding company denied they could face new demands form GIC. He said: “This is a long-term partnership.”
Cineworld’s own debts have also attracted short sellers. Following the Regal takeover it owes about £4bn.
There are also claims that the cost of refurbishing tired American cinemas could rise. The entire cinema sector faces a relatively weak film release schedule, with much riding on Disney’s Frozen 2 during the Christmas period.
The Greidingers denied Cineworld will need to spend more on refurbishment. A spokesman said the chain was “set to make in excess of $1bn this year and its financial position is very strong”.
Short sellers are led by D1 Capital Partners, which is backing Netflix to treble in value over the next five years.
Meanwhile, rival Vue has been forced to abandon a sale planned for this autumn after it was unable to drum up bids at the right price in an uncertain political climate. Its Canadian pension fund owners, Alberta Investment Management Corporation and Omers, were aiming for a £2bn valuation for the chain.
One City source said that the company “would still welcome offers but is no longer formally on the market.”
Always appreciate the contrarian position, so many thanks for that. But I think Greidinger understands the business. Anyone else at the helm, you might have a point on the debt, and maybe I’d be a little worried. But he’s got the track record and enough skin in the game. I think he’s a serious person. In any case, I also think the subscription rates for Unlimited are crucial. Although I don’t think they really compete, head to head with Netflix, an Unlimited subscription is extremely competitive. Regal did not have a subscription service. I’m not sure we have seen the Regal Chain running on all cylinders yet.
As for Netflix, it’s just a weak argument. It’s like saying Sky will render Old Trafford, Stamford Bridge and all other stadiums in all other codes obsolete. The argument for Netflix is actually quite a ‘weird’ one. Sure, there is a place for Netflix, there’s a lot of money to be made in that space, but it’s a different kind of space, it’s the one blockbuster used to occupy. And a Sky subscription is a big commitment: why buy one when you can go down the street to the pub? And Netflix is like watching League One and League Two. It’s not Premier League, and it’s not likely to become Premier League. Like I said: a weird argument.
More than that, Cinema is a collective material experience that’s critical to the human psyche. Human beings are social animals. Visit Pompeii or any other classical city, walk around it, you’ll find the theatre, and those were despotic oligarchies. Cinema is even more critical to liberal consumer society, cinema stimulates desire, animal spirits. It’s the capstone of the mall and its franchise food hall businesses, and a lot more besides. Sure I use Amazon, but Uber Eats deliver cold soggy meals. I could go on. But if cinema goes down, a lot more goes down with it too. For mine, the contrarian argument is like a fun conspiracy theory, it’s too difficult to take seriously. Conclusion: time to short the shorts. Why? Because they don’t know themselves.
cont from below...............................CINE=the most shorted LSE stock. Come on? The shorts are exposed. Who could have predicted the success of Joker? Who could have predicted level of success Frozen II has enjoyed? Who are the analysts at these hedgies? Do they even understand what they are shorting? I’m not so sure anymore. So I think the pressure is going to build on the Hedge Funds. I think we will see a squeeze.
Interesting. I have also been reflecting deeply on the issue. Dare I say, I think I am now on top of it. For mine, the key is to focus on the shorts themselves, and what a short is and what it is supposed to do. But, as for the Times article:
-Even at Disney, streaming is a different product. It’s about ‘the series’, and the series is plotted on the basis of ‘how can we keep this running’ rather than a tight three act film. Cinema is still the superior product. The ‘series’ is exhausting, the go on and on and on for no reason. Customers tire of them, and they pick-up a series half way through. As a stand-alone product, Cinema is easy and digestible.
-Potentially, I could see Amazon engaging in vertical integration, not so much the others. But even Amazon is an online retail platform, Cinema is material. It doesn’t fit Amazon; its different skillset. And I could also see Warren beating Trump and creating uncertainty. Maybe Disney, with theme parks, is a closer fit. But it’s still a stretch. To be profitable, Cinemas needs input from multiple studios. Would be Disney be comfortable sharing its screens? I don’t think they work like that.
-Yes, there is a lot of debt. But ‘why’ does it exist, this is the proper question in IMHO. It exists to take a big slice of a premier market, to capture a rundown chain that lacked subscription service and to give it one the likes of which a mature market has never seen. The debt is doing is job. It is serving a valid purpose. And it has been created at a time when debt it cheap.
- Why did Netflix throw money at Scorsese? Because they a desperately trying to win Oscars. It’s not a deal they are going to roll out in ‘wide distribution’. And they could only get Scorsese: a good craftsman, but a little intellectually lazy as a story-teller IMHO. And imagine if they lose. Imagine if they lose to Tarrantino, who makes cinema about cinema, and who just doesn’t suit their platform. Every auteur craves an Opening Night and a long cinema run. If cinema is dying, why is Netflix desperately trying to legitimise itself by seeking recognition from the Academy. If cinema was dying, they wouldn’t need it.
So regarding the shorts, these are not doing what shorts should be doing. Greidinger is right: they lack substance. How do I know? To borrow a metaphor from Cohodes, the CINE shorts have climbed a tree to wrestle an entire shadow of jaguars.
Check this, its fascinating: https://www.youtube.com/watch?v=eQ8Qjz3LlTw&t=8151s Ignore the first 15 min. But the CINE shorts fail every test that Cohodes sets for a short. Cohodes would likely short the CINE shorts. I’m not going to engage in spoilers, but suffice to say that Mooky Greidinger “does not wear a wig”. And if a Hedge Fund does not understand what I am saying, then they should definitely not be shorting CINE.
TBC....