The Cineworld (LSE: CINE) share price is now trading below the psychological barrier of 100p. It did manage to surpass this level earlier this year, but then it dipped back.
I’m not convinced about the stock and for now I’ll continue to monitor the Cineworld share price.
But there is another problem on the horizon, which I reckon could impact the shares. I’ll cover this in detail now.
The concern
The company is due to hold its Annual General Meeting (AGM) on 12 May. Normally, such events do not bother me. But last week, there were reports that institutional investor L&G is plotting to oust the firm’s chair, Alicja Kornasiewicz, as well as other directors.
It appears that the asset manager is looking to vote against the re-election of Kornasiewicz as well as Cineworld’s entire remuneration committee at the AGM. This is due to issues over executive pay.
In fact, in a recent blog post, L&G said it has “strong concerns about the structure of the long-term incentive plan granted to the executives, and its misalignment with the long-term interests of the company, its shareholders and other stakeholders”.
This comes after Covid-19 had a detrimental impact on Cineworld’s finances. Cinema closures meant it placed the majority of its employees on furlough and it suspended its dividend. I do not think the dividend will resume any time soon either.
More worries
What I’m also shocked at is how L&G “has already signalled its concerns about the pay package at the special shareholder meeting held in January 2021”. But there has been no response from management. Clearly Cineworld seems to be ignoring the issue of remuneration.
L&G goes onto say that “despite a significant vote against the proposed pay package (above 20%) by the company’s shareholders, we are concerned by the lack of response from the company’s remuneration committee and board”.
My view
Despite the Cineworld share price rising, I’ve been bearish on the stock. Now with these additional issues over executive pay, I’m staying well clear of the shares for now.
It’s worrying that given how the cinema operator has been a victim of the coronavirus crisis, Cineworld’s director remuneration is in the spotlight. That’s especially an issue after its employees have been living off furlough money for the majority of the past year.
To me, it does not look good or set an example. And I’d agree with L&G’s concerns. The fact, that the institutional investor is taking rare and significant action at the AGM, I think highlights the severity of the situation.
Of course, the future could be bright for the firm. Cineworld is expecting to open up its venues when the government eases its restrictions. I think Pent-up demand to socialise and watch movies at a cinema is very likely. This could help sales and profitability recover, which could boost the Cineworld share price further. That’s especially when major film releases have been delayed until later on in the year.
But I’m still concerned over the latest issue and do not think now is a buying opportunity for me. I’ll be watching the outcome of tomorrow’s AGM.
