November has proved to be one of those rare good months for the Cineworld Group (LSE: CINE) share price. The cinema chain’s risen 58% in value since 1 November as hopes of a Covid-19 vaccine have risen. It’s given investors in the UK share — a club of which I was a member until very recently — a chance to come up for air.
I sold out of Cineworld just over a month ago at 25.8p per share. It’s a vast discount to the 45p the UK share is currently changing hands at. While my timing may have been slightly off, I don’t regret selling my shares when I did. As I couldn’t have foreseen the Covid-19 crisis coming, an event that smashed the value of my holdings, I couldn’t have envisioned the positive testing news coming when it did either.
Going short on Cineworld
I sold last month as my concerns over Cineworld’s debt mountain hit fever pitch. More blockbuster movie releases were shunted into the long grass and the chain faced more Covid-19 lockdowns across its territories. Although optimism surrounding the chain has improved this UK share still isn’t out of the woods. Its heavy share price reversal on Thursday proves this point perfectly, Cineworld slumping as fears over its possible extinction grew again.
Rumours are circulating that the cinema giant might be forced into seeking a company voluntary arrangement (CVA) before long to stay afloat. Cineworld is locked in talks with lenders and landlords in a bid to keep its head above water. It had an eye-watering $8.2bn worth of net debt on its books as of June. This was up a staggering half a billion dollars from the end of 2019.
There are clearly good reasons why Cineworld remains the most-shorted UK share. According to GraniteShares, 9.51% of its stock was held short by 10 investment firms as of 13 November. There’s still a long way to prove that those Covid-19 vaccines will be the ‘silver bullet’ that the world’s waiting for. Fears over coronavirus mutations also give reason to be concerned as to when Cineworld will reopen its theatres.
I’d be better off with other UK shares
And in the meantime, Hollywood studios continue to rush their revenues-driving blockbusters out on streaming services instead of waiting for cinemas to open en masse. Who knows when this high-risk UK share will be able to start paying down its colossal debt pile. Cineworld remains a gamble too far, in my opinion.
I’d be much happier to look past Cineworld and go shopping for other UK shares today. Sure, the outlook for the global economy might be as clear as mud. But there’s an abundance of non-cyclical and counter-cyclical stocks that will deliver brilliant shareholder returns, even as the Covid-19 crisis rolls on. And a huge number of these can still be picked up at rock-bottom prices too.
