As Cineworld prepare to release their latest results later this month, it’ll also be reflecting on a dramatic year which has seen highs and lows for the Cineworld share price.
The recent decision by Cineworld management to back out of the $2.1bn Cineplex deal has prompted some controversy, and put the cinema chain at threat of legal action. The logic of the deal was already questionable even before the outbreak of Covid-19; Cineworld already had high debt levels due to the Regal acquisition in 2018 and the impact of weakening footfall. The acquisition of the Canadian chain was due to be completed in June, but Cineworld pulled out before the Canadian competition authority ruled on a deal.
Covid-19 hits the Cineworld share price
In truth, the abandoned acquisition may have been a drama, but the year has descended into horror for the world’s second-largest cinema chain. The Cineworld share price dropped to a record low of 21.38p in March, down 90% since the start of year. There’s been a recovery of sorts, with prices almost doubling since then, but it remains well below the 320p peak of May 2017.
The global pandemic is of course at the centre of this, as the majority of Cineworld’s 9,500 theatres were forced to close as Covid-19 spread across the world. In the UK and Ireland alone, 99 cinemas with over 1,000 screens were locked down in March, with many staff placed on the government’s furlough scheme.
Despite the UK government allowing cinema reopenings from 4 July, Cineworld has made a postponement on its own opening date. The chain was initially set to open on 10 July, before announcing a delay until 31 July. US screen openings have since been delayed to mid-August. The last thing Cineworld needed was major studios delaying a host of their summer films over concerns that no-one would go and see them. The US market in particular is in disarray, after US states reopened their economies too early, only to lock them down again.
Christopher Nolan’s eagerly-anticipated Tenet has suffered several delays, Disney has delayed the release of the latest Star Wars and Avatar films, while the new James Bond outing No Time To Die has been postponed until November.
Even as doors open and films begin to show, there are concerns over whether customers will return to levels previously seen, with the impact of PPE requirements and new Covid-19 restrictions on screen capacities. The successes of Disney+ and Netflix, reported in recent weeks, shows that the pandemic has also galvanised the threat that home-streaming services pose to cinemas.
Cineworld CEO Mooky Greidinger believes film fans will return to cinemas when they open, to “once again be immersed in the timeless theatrical experience they know and love.” Those with an interest in the Cineworld share price will certainly hope so.
Further delays could be costly
Closure is currently costing Cineworld almost $50m a month despite staff being furloughed, and the fear is that any further delays in terms of reopening, or film studios further delaying their latest releases, could see the business start to run out of cash.
The chain has delayed its results release until 21 August. What will the latest release mean for the Cineworld share price?
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