Cineworld (LON: CINE) (OTCPK: CNNWQ)has another update on the Chapter 11 process today. And the message here - about the equity - is that really, no really and we mean it this time, there is no value to the equity. “Cineworld (together with its subsidiaries, the "Group") and certain of its subsidiaries (together, the "Group Chapter 11 Companies") today announce that the United States Bankruptcy Court for the Southern District of Texas, Houston Division (the "Bankruptcy Court") has confirmed their third amended joint chapter 11 plan of reorganisation (the "Plan") at a hearing on 28 June 2023. This milestone paves the way for the Group Chapter 11 Companies to implement the restructuring transactions contemplated by the Plan and to successfully emerge from their Chapter 11 cases, after they have satisfied certain conditions to the effectiveness of the Plan. Cineworld continues to expect to emerge from the Chapter 11 cases in July 2023.”
The plan they put forward passes legal muster, it can now go ahead. And the kicker for the equity: “As previously announced, given the level of existing debt that is proposed to be released under the Plan, there will not be any recovery for holders of Cineworld's existing equity interests.” Note what this means. Not just that there is no recovery for the equity, there isn't even going to be a rights issue to the old equity as part of the fundraise. You don't even get priority in the queue to put new capital in.
Cineworld share price from London Stock Exchange.As we said before about Cineworld:
“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.”
Sorry about this but this is the way that capitalism works. Managements who get things wrong lose all the money that investors gave them. This is the flip side of the ability to make money by investing in good ideas, that's just how the system works.
