A Hollywood Ending

Cineworld, the world’s second-largest movie theater chain behind AMC, filed for Chapter 11 bankruptcy yesterday. Moving forward, the company’s membership programs and 751 theaters will continue to operate as usual while it’s being restructured, per the filing.

📉 Driving the move… Count with us: 1) a heavy debt load, 2) Covid, and 3) a string of blockbuster movies that buoyed theater attendance earlier this year trailed off into a soft slate for August and September, per Deadline.

• Cineworld acquired Regal Cinemas for $3.6 billion in 2018, which required it to take on significant debt… and while paid down over the first two years, that didn’t put the chain on great financial footing heading into Covid.
• Then when the pandemic hit, theaters closed, and production on movies slowed significantly. Leaving the logic chain looking a little something like this: a massive revenue hit + $5 billion in total debt + no big movies in the pipe = bankruptcy.

🍿 Zoom out: While up considerably from this point last year, this year’s box office is still down more than 30% compared to 2019. And that’s despite the best efforts of Top Gun: Maverick, the highest grossing movie of this year and fifth-highest in domestic box office history ($700+ million).

📝 Bottom line: Sometimes, not even Tom Cruise can save you – but retail investors sure can. Adam Aron, AMC’s CEO, tweeted yesterday: “Fortunately, AMC is in a very, very different situation — because retail investors embraced us and let us raise boatloads of cash. Thank you to retail! You really did save AMC.”