Cineworld, the London-listed cinema group heavily shorted by a number of hedge funds, saw its share price tumble on Thursday amid the continued market sell-off on the back of the coronavirus outbreak.
The FTSE 250 company’s share price dropped some 47 per cent at one point during morning trading. The slide comes as both the FTSE 100 and FTSE 250 shed roughly 6 per cent after US president Donald Trump suspended travel to the US from 26 European countries as a move to curb the spread of Covid-19.
BlackRock Investment Management, EMS Capital, Marshall Wace, Maverick Capital, SCGE and Tybourne Capital are among the hedge funds who have built notable shorts in the UK cinema chain this year, according to FCA disclosures.
Cineworld’s shares have dramatically plummeted from 120.45pp last Friday to 46.01pp on Thursday morning.
The troubled operator has frequently been in the sights of hedge fund bears in recent years, partly due to the broader structural challenges faced by the cinema sector.
Cineworld’s year-end results for 2019 showed admissions down more than 10 per cent for the year, with revenues down more than 6 per cent.
The company warned that the possibility of widespread cinema closures as a potential measure to contain the spread of Covid-19 could see it suffer a three-month revenue squeeze. That may result in “significant doubt” over its ability to continue.
“We are closely monitoring the evolution of COVID-19 and so far, we have seen minimal impact on our business. However, there can be no certainty on its future impact on our activities, hence we are taking measures to ensure that we are prepared for all possible eventualities,” CEO Mooky Greidinger said in a statement.
Should conditions relating to COVID-19 continue, or worsen, Greidinger said Cineworld has measures at its disposal to reduce the impact on its business, including capex postponement and cost reduction, in order to maintain cash liquidity.
