Member Info for Wellington99

@giantsquid NAV is the wrong metric to use for this type of business, a P/E ratio of expected future earnings is more appropriate here.
You are welcome to your view, as is anyone, but learn to read a set of accounts before slating everyone else.
A chunk of that debt is lease liabilities, which is the PV of future payments for using the cinemas, and is only debt if you completely misunderstand the accounting concepts involved.
Also, when considering the capital structure of a company, it's usually more helpful to consider enterprise value amd then assess how much of future earnings will be paid to debt versus equity holders.
The value of the shares may end up being nil or over £2, depending on how future trading goes.
If badly, the debt holders may take over the business in a debt for equity swap, or equity holders may re-finance through a rights issue.
If it goes well, and interest payments are covered, the debt maturities rolled over and no covenants are broken, then the equity holders will benefit from the upside.

Ambulance chasers - they are going after dozens of companies. Nothing to worry about.

@OhhAhhCantona I think that those numbers are the ones that I calculated and I stick by them.
Assuming that the CP award is paid in full and taking into account the extra debt that Cineworld has accrued during Covid, we can take (75p + 55p = £1.30) off the undisturbed share price. Taking that as c £2.50 before the shorters started their games because of the leveraged CP deal, that would have it at c£1.20.
We should probably knock a bit more off for the loss of any dividends for the next few years, plus general negative sentiments to a highly leveraged company, Covid etc but I don't think c 32p is a price reflecting the genuine position.
Lots of the low current price is due to an absence of buyers of CW stock (those who were willing to take a punt would have already have bought it at higher levels and some will have been burnt and sold, never to return) and institutions won’t like the risk profile.
So I can see this rising to 60p plus by the spring as Covid abates and trading improves.
On the down side (and one must always be aware that it exists) it could be that the equity tranche has no value - Cineworld won't go bust as it is a profitable trading business, but there is always the possibility that shareholders get wiped out and the debtholders taking over in a debt for equity swap. This would be the case if new capital is need and current equity holders won't pony up. Also, it could be that via a US listing or a greatly discounted rights issue current equity holders are heavily diluted, which would also be very negative for the current stock price.

On balance, I think c32p is a very attractive entry/ top up price and potentially in 2 to 3 years time we could see a resurgent business committed to paying down debt then reinstating the dividend and the court settlement reduced to a much more manageable sum which would suggest a SP over £2.
Just my opinion!

We should aslo factor in inflation, currently running at 5%+, it is likely to continue at that level or even more for a year or two, which or course helps the indebted, as long as real rates remain negative and movie theatres can increase their prices to keep up, which is likely as cinema going is one of the 'little luxuries' that people keep up whilst deferring or avoiding the larger luxuries such as foreign holidays and bigger discretionary purchases.

"This was a notable finding. Traditionally, the synergies resulting from a transaction have been viewed as benefits that accrue to the buyer, not the seller, which is part of the reason why the seller’s shareholders receive a premium on a change of control transaction."

"Cineworld argued that if the Court took into account such synergies, it also had to account for the additional (and significant) debt burden Cineplex would have carried post-transaction. The Court rejected these arguments, citing a lack of evidence on these points at trial."

Notable = wrong

I think that the key error in the judgement is that the Judge failed to recognise that although the synergies would accrue to Cineplex in its books, they would be extracted from there by Cineworld via a management charge and interest on the debt that Cineworld would have placed over Cineplex Inc, thus negating much of the benefit. Mr Carlucci said as much:

"[173] Mr. Carlucci did not dispute Mr. Rosen’s methodology or calculations. His criticism wasthat these synergies only would have been achieved if the two businesses were combined and that they would have accrued to Cineworld as the buyer. He further testified that a discount should apply to account for the probability of Cineplex achieving these synergies".

and this section underlines that she has cherry picked just the synergies without looking at the bigger picture
"[176] Although the ultimate benefit of the synergies would have accrued to Cineworld as the shareholder of Cineplex (as with any corporate benefit, which ultimately accrues to the shareholders of the corporation), it does not change the fact that these synergies would have been realized by the corporate entity, Cineplex."

I think the reason that the Judge assumed they were Cineplex's is via an unusual interpretation of the way in which the acquision was structured, i.e. via a court sanctioned scheme. For this to succeed the acquired company has to get a benefit from being acquired.

"[175] As noted above, to obtain court approval for a plan of arrangement, a company must establish that the arrangement has a valid business purpose and a positive value to the corporation: BCE, at p. 567. In Re Rapier Gold Inc., 2018 BCSC 539, at para. 99, the court considered the anticipated synergies that would be realized by the company as a benefit in approving the plan of the arrangement. In the case at bar, Mr. Mooky Greidinger’s evidence is that the purchase price payable to shareholders was reflective of the expected synergies set out in the EY Report. The synergies were one of the benefits to Cineplex of entering into the plan of arrangement."

So for an appeal to succeed I think it would be possible to argue that both of those assumptions are simply wrong

@Bonkers
I think it has more to do with the way that courts work - a judge can only consider the evidence put in front of them, and once she had decided that Mooky and co were lying through their teeth (which let's face it, they were - only a madman would close a deal at that price in the face of a pandemic) she had to pick the damages that the corporate entity (Cineplex Inc) had suffered. Looking at what was on offer she thought that lost synergies were the nearest 'correct' measure of those damages put in front of her.
The problem was that Cineworld didn't adequately demolish those calcs as inappropriate because they didn't include management charges for using Cineworld's facilities or for shouldering the interest costs that Cineplex Inc would have to bear as part of the deal.
I don't think that Barbara *could* adjust them herself, even if we presume that she was willing to.
The big question is, can a Canadian Court of Appeal look at the damages and correct that error?
So it's more a point of court procedure than anything else.

@stephentj2626 Yes, hence the word "up"

So Cineplex have been awarded CAN$1.2 billion, yet their maket capitalisation is only up CAN$80 million.

Either that's the deal of the century, or the market believes that Barbara got it *very* wrong.

Should be 1 yard otherwise it's Brexit in name only.

Who knows, but it's clearly wrong. The rest of the article is pretty low grade so it wouldn't surprise me whoever wrote it hadn't a clue what they were looking at.

Some sites report the %short as well as the % short OF THE FREE FLOAT

IIRC the short percentage of the free float can be nearly double the actual % short - Mooky's holding plus some others I guess would caused the inflated number.

@BigPlayer - your poverty disgusts me.

LPD is about as self aware as Meghan Markle.

If only someone on here had read the runes and said so much.
@latpulldown - an apology?

Two key points are that it's not just Canada, they are in the same city (Toronto, Ontario) and they had zero previous dealings with Cineworld before this time.

@Bonkers - I would guess so although they are guiding a year for a hearing but given what happened last time with 'a few months' guidance, who knows?

Though rare, the circumstances in which an appellate Court will overturn the damages assessment of a
lower Court reflect a concern about whether the lower Court gave proper weight to the factors relevant to
the damages calculation.
While the lower Court is usually in a better position to assess the parties’ evidence on damages, appellate
"Courts will not shy away from duty of quantifying damages if it means doing justice to the case.
The decision in Strudwick illustrates that while difficult to quantify, damages are not to be viewed by an
appeal Court as an impossible task. Where a lower Court fails to consider relevant factors in arriving at a
damages award, the appellate Court will intervene. In this respect, assessing damages is more art than
science"

Interesting piece below - basically an Appeals Court will only look at changing the damages quantum if they think that the original judge 'got it wrong'. I'm assuming that this is what Cineworld will have to argue.

https://www.torkinmanes.com/PDFGeneration/PrintablePublications/on-second-thought-overturning-damages-awards-on-appeal.pdf

@Alexp01
Fair enough -look forward to your post tomorrow with an explainer how it works.
Good for us long term holders to stick together.