The postponed release of the latest James Bond movie due to the coronavirus outbreak has left more than just 007 fans feeling glum.
Shares of UK-listed cinema operator Cineworld Group plunged as much as 24 per cent as the delay will defer a boost to box-office takings, while US peers also slumped and bond prices fell. Cineplex, a takeover target of Cineworld, also plunged after a short seller said the deal is likely to fall apart.
And it wasn’t just cinema owners feeling the pain: Restaurant Group, which has outlets located near to film theatres, also tumbled.
The release date for the Bond sequel No Time to Die was pushed back from April to November late Wednesday, and according to Peel Hunt analyst Ivor Jones the postponement is unlikely to be the last. Jones said that the top 10 movies will account for about 40 per cent of box office revenue in a typical year.
“Films are expensive to produce and promote and, with many Asian cinemas closed, and the prospect of, at best, reduced audiences elsewhere, other producers of major films may choose to delay release,” the analyst wrote in a note as he cut his recommendation on Cineworld to hold from buy.
The plunge for UK-listed Cineworld — which also owns the Regal chain in the U.S. and last year announced a deal to buy Canada’s Cineplex — was its biggest on record, and extended a year-to-date plunge to 45 per cent.
Cineplex weakness today can also be attributed to a new call from Hindenburg Research, which said it is short Cineplex as it expects the Cineworld deal to “fall apart or be reduced in price materially”.
Hindenburg Research said on Twitter that while the market has been indicating roughly a 90 per cent chance of the deal going through, this appears to be “horrendously mispriced”. The short seller sees the odds nearer 50 per cent to 60 per cent with the market “significantly underestimating the desperation” that Cineworld will seek to break or modify the deal. Hindenburg expects Cineplex may drop more than 50 per cent in a total deal break scenario.
Cineworld had no immediate comment on the short call and Cineplex didn’t immediately respond to a request for comment.
In New York, Cinemark Holdings fell as much as 6.2 per cent, IMAX slid 7.2 per cent and AMC Entertainment Holdings dropped 10 per cent. And in Belgium, cinema operator Kinepolis Group retreated 9.8 per cent, while projector-maker Barco descended as much as 6.2 per cent.
Loans from European chain Vue were bid lower, according to three people familiar with the matter, and sterling bonds from AMC also slid.
Restaurant Group, whose outlets include Frankie & Benny’s and Wagamama, tumbled as much as 18 per cent in London. That took the stock’s decline for the year to date to more than 50 per cent. Previous Bond releases have provided a short-term boost to sales for the company.
Given a high proportion of the cost base of cinema companies is fixed, anything that affects admissions can have a material impact on earnings, JP Morgan analyst Alexander Mees said by email.
“It would have been problematic for the industry to see one of its big hopes fall flat at the box office,” Mees wrote. “In that regard, it makes sense to delay to November when hopefully the situation will have calmed down.”