Shares at British cinema chain Cineworld (LON:CINE) have been something of a horror show on Thursday, falling almost 7% as the firm reportedly considers launching a CVA amid ongoing financial difficulties.
A CVA – an insolvency procedure common among businesses seeking to cut costs – would help to take the pressure off of Cineworld’s mounting debt crisis, with over £6 billion in debt and the chain’s half-year results revealing a bruising £1.3 billion loss.
Rumour has it that if a CVA is agreed then as many as 127 of its UK cinemas may have to permanently close their doors as part of the arrangement, although a source close to Cineworld has cautioned that no deal has been made at this stage.
Other options are reportedly still being considered. Advisors from consulting firm AlixPartners were drafted in last month to help organise emergency talks with Cineworld’s creditors, as loan terms are likely to be breached by December.
Adding to the sour news, earlier today the owner of London’s entertainment complex Trocadero Centre filed a High Court claim against Cineworld, suing it for £1.4 million over unpaid bills.
Shares at the chain nosedived 6.81% to 45.10p at GMT 13:23 on Thursday, following on from a disappointing year with an annual low of a mere 21.38p in March when the UK launched its first lockdown.
Although Cineworld’s share price reached a rosier 52.98p earlier this week on Monday on the back of promising vaccine development news, the CVA rumours have understandably quashed hopes of an imminent recovery.
The chain’s dividend yield stands at 13.03%, and its P/E ratio at 3.00, while 63.82% of MarketBeat’s community voters list the chain as an “outperformer” compared to the S&P 500 average.
However, Cineworld was listed by City A.M. as one of the top 10 most shorted stocks as of 12 November according to analysis by exchange-traded fund provider Granite Shares, with 9.5% of the cinema’s stock held short by pessimistic investors last week.