Cineworld does an AMC as shares surge amid short squeeze

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Cineworld Group PLC (LON:CINE) shares surged on Friday as the struggling cinema chain saw investors jump into the stock in a bid to squeeze short-sellers.


In early afternoon trading, the shares were 12.5% at 64.5p following a torrid week for the company that saw its price drop 26.6% between Monday’s open and Thursday’s close.


READ: Cineworld shares almost certainly the wrong price, says broker


The decline appears to have been informed by heavy short-selling pressure, with Cineworld now the UK’s most-shorted stock with around 7.5% of its shares held in short positions by six major investment managers, most of whom will have seen sizeable payoffs from the recent slide.


Cineworld’s appeal to short sellers is likely down to its massive US$8.3bn debt pile and concerns about how the firm will stay on top of it, as well as fears that any resurgence of the pandemic in its key US and UK markets could force it to close again, cutting off revenues.


Another cause for concern is the shifting methods of releasing films to consumers that have been accelerated by the pandemic, particularly the releasing of new films on streaming platforms at the same time as they arrive in cinemas.


This trend was flagged up overnight by Cineworld’s chief executive Mooky Greidinger, who said in an interview with Deadline that the opening US box office for Marvel blockbuster Black Widow last weekend could have been over US$110mln compared to the actual US$80mln figure if the film’s maker Walt Disney Co (NYSE:DIS) had not simultaneously released the film on the Premier Access segment of its Disney+ streaming platform.


However, despite the numerous short-selling pressures, Cineworld’s woes appear to have attracted the interest of investors aiming to buy up the shares in an effort to squeeze short positions and inflict large losses against the funds betting against the company in a manner similar to fellow cinema chain AMC Entertainment Holdings Inc (NYSE:AMC) and video game retailer GameStop Corp (NYSE:GME).


There could also be interest from old-fashioned bargain hunters, with Cineworld’s shares still well below their pre-pandemic levels.

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