Cineworld share price collapsed this week after the company warned that it could file for bankruptcy in the next few months. The CINE stock tumbled to a low of 1.81, which was significantly lower than the year-to-date high of over 40p. As a result, its market cap has collapsed to about 41 million pounds. This is a major downfall for a company that acquired Regal Cinemas for more than $1 billion.
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Not in Sell Zone
Cineworld stock price collapse has been a long time coming. In March this year, I warned that the company was facing existential challenges as growth slowed, debts rose, and an important lawsuit continued. The firm is being sued by Cineplex, a large Canadian movie theatre company for over a billion dollars.
Cineworld, like other zombie companies like Carnival, have been facing many challenges. The movie theatre industry is not recovering at a faster pace as what many analysts were expecting. Earlier this month, the firm said that it hopes to see more demand in the fourth quarter. At the same time, the company has accumulated over $5 billion worth of debt. And with interest rates rising, it will struggle to pay it back.
Therefore, in this situation, a bankruptcy will be the best way out for the company since it will give it a chance to reorganize its resources.
Meanwhile, with Cineworld heading towards bankruptcy, analysts are worried about other theatre companies like AMC. This explains why the AMC stock price has also cratered this week. AMC will likely not file for bankruptcy any time soon.
For one, the company has a relatively stable balance sheet thanks to the fundraising it used last year during the meme euphoria. At the time, it managed to increase its outstanding shares from 104 million in 2020 to 516 million. This week, the company launched APE, a new preferred share for retail traders. The firm did that by unveiling 1 billion new APE units, each of which is equivalent to one common share. It then issued about 516 million of them to existing AMC holders.
Cineworld share price forecast
The weekly chart shows how the CINE share price has struggled in the past few years. It crashed from an all-time high of 330p in 2017 to just 3p. As a result, the stock dropped below all support levels and 50-day and 25-day moving averages. The MACD remained below the neutral point.
Therefore, the Cineworld share price will likely continue falling in the coming weeks and test the support at 1.50p. A move above the resistance at 5p will invalidate the bearish view.