News flow surrounding cinema chain Cineworld Group (LSE: CINE) has been more cheery in recent sessions, driving demand for its shares to the stars. The UK share rocketed more than 20% on Monday, above 56p, on positive news surrounding its balance sheet. The Cineworld share price is now at its most expensive since early September.
But would I buy this UK share for my Stocks and Shares ISA? Let me explain why Cineworld’s soaring, and what investors can expect in the short term and beyond.
A strengthened balance sheet
As I say, the main driver for Cineworld’s share price in recent hours has been a positive update on its liquidity position. The FTSE 250 stock plummeted at the back of last week as rumours that it’ll soon be seeking a company voluntary arrangement (CVA) swirled.
However, the UK share put these reports to bed on Monday with news it’s secured $750m of extra liquidity it hopes will see it through to the end of 2021. It’s managed to do this by agreeing a new $450m debt facility, by extending its $111m revolving credit facility to 2024, and by bringing forward the end its US tax year. The latter move will create a tax refund of $200m, to be paid in early 2021.
Still a VERY risky UK share
But here’s the bad news for Cineworld and its investors…
As it said, the additional $750m raised will help it survive until the end of next year. However, this is assuming its cinemas will reopen “no later than” May 2021.
Recent positive news surrounding a Covid-19 vaccine has raised hopes that cinemas could reopen to the public before too long. But key questions over the efficacy and the rollout of Covid-19 vaccines are yet to be answered.
Assuming that Cineworld will be able to start flogging tickets to eager moviegoers soon is no guarantee. And so doubts over this UK share’s ability to keep going could resurface before too long.
The roaring popularity of streaming services also causes me to worry about Cineworld’s recovery. And not just because cinemagoers could continue to shun a trip to the movies in a post-pandemic landscape in favour of catching a flick at home.
Filmmaking colossus Universal has been signing deals with North American cinema chains to shorten the theatrical window. The move scythes down the exclusivity period that movie theatres have to show films before they become available on streaming services. It could be the start of a trend that further undermines the long-term outlook for operators like Cineworld.
Cineworld’s fundraising efforts this week have kept the wolf from the door. But the future of this UK share remains very much in the air. This is why I’d much rather buy other stocks for my ISA today.
