Cineworld shares plunged last week after a Canadian court ruled that the company had to pay $900M in damages to Cineplex, Canada’s largest exhibitor and the fourth largest in North America. UK-based Cineworld is the second-largest global cinema chain and owner of Regal Cinemas, the second-largest U.S. exhibitor.
This legal battle has been roiling since the early days of the pandemic, when Cineworld pulled out of a December 2019 agreement to acquire the Canadian circuit for $1.6B. During the court case, documents surfaced showing that Cineworld’s investors pressured company management to cancel the deal after the pandemic forced a global shutdown of theatres. Cineworld announced in June 2020 that it was canceling its merger, prompting Cineplex to file suit against its suitor, characterizing the action as “nothing more than a case of buyer’s remorse.”
The price of Cineworld shares dropped by a whopping 38% after the ruling, with investors worried that this new financial obligation would jeopardize the exhibitor’s post-pandemic recovery. Cineworld is expected to appeal the ruling.
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