Forget the surging Cineworld share price! I’d rather buy other UK shares in my ISA

The Cineworld share price is going through the roof again. But is it a risk too far? Here, I explain why I’d rather buy other UK shares today.

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

News flow surrounding cinema chain Cineworld Group (LSE: CINE) has been more cheery in recent sessions, driving demand for its shares to the stars. The UK share rocketed more than 20% on Monday, above 56p, on positive news surrounding its balance sheet. The Cineworld share price is now at its most expensive since early September.

But would I buy this UK share for my Stocks and Shares ISA? Let me explain why Cineworld’s soaring, and what investors can expect in the short term and beyond.

A strengthened balance sheet

As I say, the main driver for Cineworld’s share price in recent hours has been a positive update on its liquidity position. The FTSE 250 stock plummeted at the back of last week as rumours that it’ll soon be seeking a company voluntary arrangement (CVA) swirled.

However, the UK share put these reports to bed on Monday with news it’s secured $750m of extra liquidity it hopes will see it through to the end of 2021. It’s managed to do this by agreeing a new $450m debt facility, by extending its $111m revolving credit facility to 2024, and by bringing forward the end its US tax year. The latter move will create a tax refund of $200m, to be paid in early 2021.

Still a VERY risky UK share

But here’s the bad news for Cineworld and its investors…

As it said, the additional $750m raised will help it survive until the end of next year. However, this is assuming its cinemas will reopen “no later than” May 2021.

Image of person checking their shares portfolio on mobile phone and computer

Recent positive news surrounding a Covid-19 vaccine has raised hopes that cinemas could reopen to the public before too long. But key questions over the efficacy and the rollout of Covid-19 vaccines are yet to be answered.

Assuming that Cineworld will be able to start flogging tickets to eager moviegoers soon is no guarantee. And so doubts over this UK share’s ability to keep going could resurface before too long.

The roaring popularity of streaming services also causes me to worry about Cineworld’s recovery. And not just because cinemagoers could continue to shun a trip to the movies in a post-pandemic landscape in favour of catching a flick at home.

Filmmaking colossus Universal has been signing deals with North American cinema chains to shorten the theatrical window. The move scythes down the exclusivity period that movie theatres have to show films before they become available on streaming services. It could be the start of a trend that further undermines the long-term outlook for operators like Cineworld.

Cineworld’s fundraising efforts this week have kept the wolf from the door. But the future of this UK share remains very much in the air. This is why I’d much rather buy other stocks for my ISA today.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Investing Articles

After it crashed 25%, should I buy this former stock market darling in my Stocks and Shares ISA?

Harvey Jones has a big hole in his Stocks and Shares ISA that he is keen to fill. Should he…

Read more »

happy senior couple using a laptop in their living room to look at their financial budgets
Investing Articles

How’s the dividend forecast looking for Legal & General shares in 2025 and beyond?

As a shareholder, I like to keep track of the potential dividend returns I could make from my Legal &…

Read more »

artificial intelligence investing algorithms
Investing Articles

Could buying this stock with a $7bn market cap be like investing in Nvidia in 2010?

Where might the next Nvidia-type stock be lurking in today's market? Our writer takes a look at one candidate with…

Read more »

Investing Articles

Is GSK a bargain now the share price is near 1,333p?

Biopharma company GSK looks like a decent stock to consider for the long term, so is today's lower share price…

Read more »

Snowing on Jubilee Gardens in London at dusk
Investing Articles

Could December be a great month to buy UK shares?

Christopher Ruane sees some possible reasons to look for shares to buy in December -- but he'll be using the…

Read more »

Young mixed-race couple sat on the beach looking out over the sea
Investing Articles

Sticking to FTSE shares, I’d still aim for a £1,000 monthly passive income like this!

By investing in blue-chip FTSE shares with proven business models, our writer hopes he can build sizeable passive income streams…

Read more »

Growth Shares

BT shares? I think there are much better UK stocks for the long term

Over the long term, many UK stocks have performed much better than BT. Here’s a look at two companies that…

Read more »

British Pennies on a Pound Note
Investing Articles

After a 540% rise, could this penny share keep going?

This penny share has seen mixed fortunes in recent years. Our writer looks ahead to some potentially exciting developments in…

Read more »