Cineworld share price undervalued as loan default looms

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Cineworld’s share price is down 2.57% on Wednesday after being rejected due to a failed breakout attempt at a price of 31.72p. This comes as the company seeks to further delay repayment of its debt to former Regal Entertainment shareholders.

According to a Reuters report, the company said it had approached former shareholders of its U.S. division Regal Entertainment to extend the moratorium on debt repayment obligations it previously negotiated in February 2022. The second-largest company in cinema in the world had promised a reimbursement of 170 million dollars. to disgruntled Regal Entertainment shareholders, who disputed the $23 per share payout they received following Cineworld’s acquisition of Regal in 2017. Final repayments are due June 30.

Cineworld is currently struggling with an $8.9 billion debt load as it tries to revive its business after severe damage to revenue from the COVID-19-induced closures of its theaters. The company had financed the acquisition of Regal for $3.6 billion with a credit facility. A court ruling against it over a botched deal with Cineplex has further worsened the company’s financial situation. As a result, Cineworld’s share price suffered a relentless sell-off that took its price from a March 18, 2021 high of 124.80p to 29.58p.

Cineworld Share Price Projections

The breakout of the triangle led to a measured move that touched support at 26.63 on March 7, 2022. The recovery rally was rejected to 39.95 (March 17 high) ahead of the rally south, suppressing 31.72 (low from April 7-22). In the process. A move back towards the broken support-turned-resistance followed, with the new resistance ignoring further bullish action.

This opens the door for a push south, initially targeting 26.63. If this new test of 26.63 succeeds and results in a break of this support, 23.49 (double bottom of October 16/28, 2020) becomes the new downside target. The October 5, 2020 low at 15.55 provides an additional pivot if the bulls fail to defend the support line at 23.49.

On the other hand, a break of 31.72 is needed to reverse the bearish bias, opening the door to the March 28th high at 35.07. Above that level, a push takes price activity towards 39.95 (Jan 28 and Mar 3 highs) before 46.52 enters the mix as an additional focus north. .

Cineworld: daily chart

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