For much of 2022, shares in battered cinema chain Cineworld Group (LSE: CINE) have been among the most actively traded across the whole London Stock Exchange. But with the group staring down the barrel of bankruptcy, how much value can really be left in the Cineworld share price?
Covid-19 killed the share price
In spring 2019, the share price was riding high, closing at 319.6p on 18 April 2019. Unfortunately, less than a year later, Covid-19 arrived — crashing stock markets around the globe.
In early 2020, Cineworld shares closed at 220.7p on 3 January. But with social restrictions and lockdowns preventing consumers from visiting cinemas, they imploded from February 2020 onwards. On 16 October 2020, this stock closed at 24.76p.
However, on ‘Vaccine Monday’ (9 November 2020) news broke of highly effective vaccines against coronavirus. The Cineworld share price skyrocketed and continued to rise, closing at 122p on 19 March 2021. Phew.
It’s been all downhill since then
The bad news for shell-shocked shareholders of Cineworld is that its share price has fallen relentlessly since the above miraculous recovery. Here’s how the shares have performed over the short and medium term (based on Friday’s closing price of 5.81p):
| One day | -6.3% |
| Five days | 132.5% |
| One month | 138.2% |
| Six months | -79.9% |
| 2022 YTD | -81.8% |
| One year | -91.1% |
| Five years | -98.0% |
Having lost all but 2% of its market value over five years, Cineworld is valued at £78.4m. Still, this is roughly triple its valuation on 19 August, when the shares crashed to a lifetime low of 1.8p. So what sent this stock zooming up over 4p (+222.8%) in under three months?
Cineworld has become a trading stock
The latest rebound in the share price followed an important bankruptcy settlement for the group. But with a market capitalisation below £80m and carrying $8.9bn of net debt at mid-2022, the company is crippled by colossal debts.
What’s more, consumer confidence has collapsed as Britons struggle to cope with soaring inflation, sky-high energy and fuel bills, and rising interest rates. With a recession looming in 2023, I think Cineworld will be lucky to survive in its current corporate form. What seems likely is that further restructuring or insolvency will wipe out any remaining value for shareholders, most likely leaving the share price at 0p.
Of course, should Cineworld survive the next six months, its chance of longer-term survival could increase dramatically, especially if its negotiations with its creditors go in its favour. And cinema attendances may well recover over the next 12 months.
Personally, as a long-term value investor, I wouldn’t touch the shares with the proverbial bargepole. But that’s not the point, because it has become a stock for traders to flip between themselves. Indeed, this stock was the most-bought and most-sold share among major UK brokers last week. At one leading broker, it accounted for 3.6% of buys and 3.3% of sales by number of deals.
In summary, investors are playing ‘pass the parcel’ or ‘hot potato’ with the stock. With its ability to continue as a going concern in doubt, I wouldn’t want to hold Cineworld shares when (or if) they blow up. To be clear, I will never gamble/speculate on the share price by buying these shares!
