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Cineworld’s share price has seen a modest recovery in recent days following progress in securing new financing. The stock rose to 6.92p, its highest level since August 19th, marking a 110% increase from its lowest point this year. However, it remains about 97% below its peak in 2021, giving the company a market cap of just over £50 million.
Earlier this year, I highlighted the significant risks facing Cineworld, including its massive debt and the slower-than-expected recovery of the movie theater industry. Additionally, the company was embroiled in a major lawsuit with Cinemark, a leading Canadian firm.
My prediction that Cineworld was at risk of bankruptcy proved accurate, as the company recently filed for bankruptcy protection. This move aims to help Cineworld negotiate its debts and potentially halt the lawsuit by Cinemark, which is seeking about $1 billion, alleging that Cineworld unlawfully withdrew its bid for the company.
Cineworld’s share price has seen some recovery after a bankruptcy judge granted the company immediate access to about $785 million in financing. These funds are critical, as the company had just $4 million in cash and hopes to use the new financing to continue operations.
However, significant risks remain. Cineworld is burdened with over $8 billion in debt, and the movie industry is facing challenges, particularly with a box office slowdown as more studios focus on streaming.
The daily chart shows that Cineworld’s share price has rebounded recently due to the new financing. Despite this, the stock remains below its 25-day and 50-day moving averages, and the awesome oscillator is still below the neutral level.
As a result, the stock is likely to continue declining, with sellers potentially targeting the year-to-date low of 1.83p. If the price breaks above the resistance level at 6.74p, this bearish outlook would be invalidated.