Cineworld stays in hedge fund short sellers’ sights following steep first-half losses

Cineworld

Cineworld, the beleaguered London-listed global cinema group long targeted by hedge fund short sellers, has been dealt a fresh blow as a result of the Covid-19 pandemic, reporting a USD1.6 billion first-half loss with revenues plummeting after theatres were forced to close.

AHL and Citadel Partners are two high-profile hedge fund managers which have ramped up bets against the troubled operator, while BlackRock, Tekne Capital Management, Jericho Capital Asset Management and Adelphi are also among those holding short positions in the stock, according to recent FCA regulatory disclosures.

Cineworld’s share price dipped from 49.83pp to 40.48pp following its results statement earlier this week. The company posted a USD1.6 billion loss in the first six months of 2020, after it was forced to close all its sites from mid-March, only gradually reopening to customers from late June onwards.

Group revenue stood at USD712.4 million in the period up to 30 June, a steep fall from the USD2.15 billion recorded in the first half of 2019. Some 561 out of its 778 sites have now reopened, with 200 theatres in the US, six in the UK, and 11 in Israel remaining shut.

While Covid-19 has put the squeeze on Cineworld’s operations this year, sending its share price southwards, the company has frequently been the target of negative wagers in recent years. Bearish bets on the company focus on the broader structural challenges faced by the cinema sector more broadly, which continues to face fierce competition from an assortment of online entertainment streaming services.

Although it generated a pre-tax profit of almost USD140 million in the first half of last year, its 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 FTSE 250 company raised some USD360.8 million of additional liquidity in the first half of 2020 to bolster its operations, and also made use of government support schemes to help employees, the results statement said.

“There can be no certainty as to the future impact of Covid-19 on the group,” Cineworld said in its results, warning that further liquidity raises may be needed if tighter government restrictions on social gatherings led to renewed cinema closures. “It would have a negative impact on our financial performance.”

Commenting on the results, Mooky Greidinger, CEO of Cineworld Group plc, acknowledged the “substantial” impact of Covid-19 both on the group and the wider leisure industry.

“Current trading has been encouraging considering the circumstances, further underpinning our belief that there remains a significant difference between watching a movie in a cinema – with high quality screens and best-in-class sounds – to watching it at home,” Greidinger said.

“Despite the difficult events of the last few months, we have been delighted by the return of global audiences to our cinemas toward the end of the first half, as well as by the positive customer feedback we have received from those that have waited patiently to see a movie on the big screen again.”