Short sellers line up more bets against Cineworld after £700m damages bill
Nearly 16 per cent of Cineworld’s shares are on loan to short sellers, according to the latest data from IHS Markit.
Short sellers have lined up more bets against the heavily indebted cinema chain amid deepening concerns over the effect of the Omicron variant on the business, and the whopping £722m damages it has to pay to Canadian rival Cineplex.
Cineplex has been the UK’s most shorted company since the height of the pandemic ten months ago, while the massive fine – handed down on Wednesday by the Ontario Superior Court of Justice – is worth more than the company’s entire market capitalisation.
Following the verdict, Cineworld’s shares dropped 40 per cent on the FTSE 250, with shares only showing partial signs of recovery since then.
Cineworld plans to appeal but it is unclear whether they will be able to overturn the ruling.
Pandemic-related contract clauses are typically watertight in Canada, after businesses suffered heavy losses during the Sars epidemic two decades ago.
If an appeal is unsuccessful, it may be forced to sell Regal Cinemas, its US business and the world’s second largest cinema chain.
This made up around three quarters of its sales prior to the Covid crisis.
Alongside looming financial pressures, Omicron threatens to disrupt what should have been a promising period for Cineworld with blockbuster releases such as Spiderman: No Way Home boosting sales.