Cineworld (LON: CINE) (OTCPK: CNNWQ) shares are down 22% again this morning. This isn't a huge surprise given that they've been in Chapter 11 for some time now. The actual surprise has been that the value has stayed above zero so long. For the inherent, objective, value of CINE shares is zero, zip, nada, and has been for some time. There is going to be no recovery for equity shareholders from this mess. Just none. The only value is as a coupon to claim the tax loss.
We have pointed this out before about Cineworld: “Well, OK. That's what the Chapter 11 business is all about. Maximising the value of the business assets so as to maximise the return to those debtors. It is even possible - it happened at Hertz after all - that the return will be so maximised that there will be a payout to the equity. Except as Cineworld makes very clear, this isn't going to happen: “As previously announced, in light of the level of existing debt that is proposed to be released under the Plan, the Proposed Restructuring does not provide for any recovery for holders of Cineworld's existing equity interests.” By any reasonable standard the equity has no value. Not even as an option on the idea that someone will bid some silly amount for some set of the corporate assets. They've been touted around the world for some months now and no one has bitten - they're not going to.”
In fact, we said this several times about CINE shares. It's not that we like telling people they've lost all their money but there is a joy at being right.
Cineworld share price from London Stock Exchange
And we really did keep saying that Cineworld, CINE shares, were worth nothing. So no one can say they weren't warned, either by us or the company themselves. And so today we get that most recent announcement from Cineworld itself: “The Proposed Restructuring, when implemented, will transform the Group's balance sheet and provide it with significant additional liquidity to fund its long-term strategy. In particular, the Proposed Restructuring will involve the release of approximately $4.53 billion of the Group's funded indebtedness, the execution of a rights offering to raise gross proceeds of $800 million and the provision of $1.46 billion in new debt financing. Given the level of existing debt that is expected to be released under the Plan, the Proposed Restructuring does not provide for any recovery for holders of Cineworld's existing equity interests.”
“No recovery” translates as “no value” for Cineworld equity. That's just the way it works when a company goes bust, equity loses out.
