(Bloomberg) -- Cineworld Group Plc equity holders are set to be left with nothing, a short seller warned after the cinema operator said this week that it was considering filing for US bankruptcy.
Argonaut Capital Partners LLP’s Barry Norris told Bloomberg Television that Cineworld’s pursuit of acquisitions that were funded by debt had left it with a “completely unsustainable” capital structure.
London-based Norris said Cineworld had a chance to raise equity but didn’t. “This is not a company you should feel sorry for in any way,” he said, adding that it was run “on a wing and a prayer.”
A spokesman for Cineworld declined to comment on Argonaut’s position or interview but requested that Bloomberg highlight the firm’s Aug. 22 statement, in which it said it would “maintain its operations in the ordinary course until and following any filing and ultimately to continue its business over the longer term with no significant impact upon its employees.”
Argonaut has shorted Cineworld for four years, the Times of London reported on Tuesday.
Cineworld shares slumped as much as 13% Wednesday before trimming the drop to 11% as of 11:01 a.m. UK time. The stock has lost more than 90% of its value in 2022, leaving the firm with a market capitalisation of 37 million pounds ($44 million).
The cinema chain racked up large debts from acquisitions, and has suffered from a weak box-office recovery following Covid-19 lockdowns that kept customers away from theaters.
Following its 2018 acquisition of US chain Regal, Cineworld carries $4.84 billion in net debt, according to its latest annual report. It also faces nearly $1 billion in damages to Canada’s Cineplex Inc. over an aborted takeover bid.
©2022 Bloomberg L.P.
Advertisement