Cineworld share were rocked on Wednesday by the news of a court ruling ordering the cinema group to pay Cineplex C$1.23 billion, equivalent to £720 million at current exchange rates.

The legal proceedings relate to the termination of a takeover approach by Cineworld of Cineplex in June 2020.

Cineplex alleged Cineworld broke their obligations under the agreement and Cineplex set about claiming damages.

Cineworld filed counter claims that were rejected by the court.

The ruling will be a hammer blow to Cineworld and their investors who have faced dire trading conditions during the pandemic.

Cineworld shares were down 30% on Wednesday as investors questions the ongoing viability of the company with such a large penalty hanging over them.

“Cineworld’s hunger for growth has come back to haunt it,” said AJ Bell investment director Russ Mould.

“Pre-pandemic the company had expanded through acquisitions including taking on considerable debt to plant a flag in the US via the purchase of Regal Entertainment.

“Despite having borrowings up to its eyeballs, Cineworld then chased more growth by striking a deal in December 2019 to buy Canada’s Cineplex. That was a bold move, and many people suggested its eyes were bigger than its belly.

“The timing couldn’t have been any worse. The pandemic struck and it looked like Cineworld’s only way to survive this crisis was to bail out of the Cineplex deal, given that it had massive debt repayments and suddenly no income.”

The latest court ruling came shortly after another legal case that saw Cineworld pay out to prior shareholders of Regal which Cineworld took over in 2018.

“Ironically the ruling comes three months after an agreement by Cineworld to pay $214 million to disgruntled Regal shareholders who argued that the £2.7 billion acquisition of the US cinema chain in 2018 wasn’t done at a fair price,” Mould said.

“Cineworld is losing credibility fast with investors, having taken too many risks with expansion and paid the price for unscrupulous tactics.”

Lloyds share price has remain subdued in the past week as investors prepare for the Bank of England’s interest rate decision.

Having previously rallied on expectations of a rate hike in December, the discovery of the Omicron variant has all but put pay to hopes of a rate hike this week.

This has caused negative price action in Lloyds shares as the prospect of higher rates is generally considered to provide a boost to banking profitability.

Lloyds shares are one of the most actively traded stocks on the London Stock Exchange and are a good bellwether for overall sentiment of equity traders.

With Lloyds shares falling into the announcement, it is clear equity markets are positioning for rates to be kept on hold, and a prolonged period of near-zero rates.

However, with UK inflation data soaring 5.1% in November, it really does put the Bank of England in a difficult position.

“The most interesting part of all of this is whether the Bank of England will raise rates this week on the back of this data. Having inflation running at 5.1% and interest rates at 0.1% doesn’t seem like the most sensible idea and people could make the case they are failing in achieving their mandate,” said Dan Boardman-Weston, CIO at BRI Wealth Management.

“The decision is finely balanced though as large parts of this inflationary pressure are outside of their control and moving rates higher won’t help. When this is coupled with the emergence of Omicron, the decision is on a knife edge. They may decide to hold fire until they have further clarity on the impact Omicron has on health and wealth.”

Analysts also questioned the overall strength of the UK economy and pointed to the robustness of recovery as a further headache for the BoE.

Faced with such a high inflation reading, coming in at 5.1% and with forecasts that the only way is up, the Bank of England would ordinarily be expected to call time on the cheap money party and raise interest rates. But here's why it's looking unlikely to happen tomorrow 👇

— Susannah Streeter (@StreeterNews) December 15, 2021

Despite the drop going into the Bank of England meeting, the Lloyds share price is still up 23% YTD.