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Sep 14, 2020

Cineplex to be dropped from TSX Composite as pandemic continues to hammer cinemas

Cineplex shares to be removed from TSX Composite Sept. 21

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Canada’s largest theatre chain is ending its run on the S&P/TSX Composite Index.

Cineplex Inc. will be one of two companies removed from Canada’s benchmark index on Sept. 21, according to a Friday release from S&P Dow Jones Indices.

The move comes just six weeks after the theatre chain began phased re-opening of its cinemas which were shuttered by the COVID-19 pandemic.

The company’s shares have plummeted in 2020, in part due to the losses the company sustained while its cinemas were unable to open its doors, but also due to the collapse of its planned $2.15-billion takeover by U.K. cinema chain Cineworld Plc. That deal was scrapped in mid-June with Cineworld accusing Cineplex of breaching the deal’s terms.

Cineplex shares closed at an even $31 on Mar. 10, the day before the COVID-19 outbreak was officially declared a pandemic by the World Health Organization. Cineplex opened Monday trading at $8.20, a drop of nearly 75 per cent.

The company saw a 95-per-cent second-quarter revenue drop to a total of $22 million.

Cineplex chief executive officer Ellis Jacob​ has expressed his optimism for the company’s future success on multiple occasions to BNN Bloomberg during the pandemic, citing the strength of coming releases and the promotional role cinemas play in the film industry.

“We basically create the awareness with the guest and we also create [demand for] sequels for the studios to create, and then they can design games and theme parks behind it. And you need that as the promotional vehicle to keep these movies constantly coming into theatres,” Jacob told BNN Bloomberg on Aug. 20.

However, the chain has suffered from distributors seeking other avenues for exhibition and restricted audience sizes demanded by the era of social distancing.

The Walt Disney Company did an end-run around cinemas with its latest offering, ‘Mulan,’ instead offering the film for a ‘premium’ fee of $34.99 on its Disney+ streaming service.

Even Christopher Nolan’s ‘Tenet’ – which had been scheduled for a July 17 release by Warner Bros. Pictures – has been hampered by attendance restrictions. The film opened to US$20.2 million North American box office over Labour Day weekend, dropping by nearly two-thirds to US$6.7 million last weekend. By contrast, Nolan’s previous film – the 2017 World War II epic ‘Dunkirk’ – opened to a weekend gross of US$50 million in July 2017.

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