Cineworld Share Price Analysis: Dilution is Coming

The Cineworld share price has come under intense sell-off as investors predict that additional dilution is coming. CINE stock is trading at 32.56p, slightly above this year’s low of 26.63p. However, it has collapsed by over 74% from its highest point in 2021. So, what next for the vulnerable CINE stock price?

In normal periods, Cineworld should be having a good year. The number of Covid cases and the death rate has dropped thanks to the vaccines. As a result, many governments have eased the restrictions that existed a few months ago. This, coupled with the slate of blockbuster movies scheduled this year, will lead to a strong performance for the company. Some of the top movies that will fuel its growth are Batman, Avatar, and Black Panther.

Cineworld is now in a position where it is fighting for its life and where a capital raise is highly probable. Besides, its cash burn has continued, meaning less than $350 million in cash. The company has a market cap of less than 500 million pounds and over $4.8 billion in total debt. It is also fighting a lawsuit brought by Canada’s Cineplex that could easily push it into bankruptcy. In a recent note, an analyst summarized this saying:

In essence, Cineworld looks set to breach its banking covenants, even in a best-case scenario, leaving few options on the table other than to recapitalize. Whether this takes the form of a debt for equity swap or a straight equity raise, the implication for shareholders is clear: dilution.”

Cineworld’s management has talked about some measures it could take. In 2021. They proposed listing Regal Cinemas in the US. While that would be ideal, it is unclear how much money investors will value the company. It is also unlikely that retail investors will embrace Regal like they embraced AMC.

Cineworld share price forecast

The daily chart shows that the CINE share price has been struggling in the past few months. And the situation seems to be worsening by the day. The stock remains below the descending trendline that is shown in green. It has also moved below all moving averages and is approaching its lowest level this year.

Therefore, there is a likelihood that the Cineworld stock price will remain under pressure for a while. This could see it drop to about 25p in the near term.

Cineworld share price