Worst case is Chapter 7, which is what we in the UK are more familiar with - administrators are called in. The business is liquidated. Creditors get the proceeds. Shareholders get nothing.
Chapter 11 protects from Chapter 7 until around February.
Best case: debts are restructured to be sustainable, some debt for equity to write off some debts. Film slate improves increasing revenue back to where it was pre covid. Cineplex case is settled favourably. Leases are renogiated to more affordable levels, reducing the up to 30% increases in rents post covid. Unprofitable locations are closed.
Most likely outcome is the latter IMO with a NewCo formed after Chapter 11. Existing shareholders moved to NewCo. The question is how much dilution in the NewCo for existing shareholders. Its not necessarily bad news, it all depends on the value of the NewCo. If you have 1000 shares worth 3p each in cineworld which are diluted to 100 shares in NewCo, but if those shares are worth 31p, shareholders are better off. However, if existing shareholders are given 10 shares in NewCo shareholders are worse off, at least short term.
Noone knows the value of the NewCo as much depends on the debt burden after a restructure, how much rents can be negotiated down, how much equity creditors demand, whether the film slate improves and whether people return to cinema.
And, of course the elephant in the room that is the cineplex case. Chapter 11 protects cineworld from paying the damages until the appeal is heard. Appeal is scheduled for early next month. IMO cineworld lose and have to pay the damages as set, chapter 7 is a very real possibility.
Its why it is very high risk, noone knows. Anyone saying they have any answers are lying. Noone knows. Not even Mooky.
Either come February Cineworld exits Chapter 11 with a viable, sustainable, profitable business. Or, it is forced into Chapter 7 and is liquidated.
Again, either scenario there is the very real possibility existing shareholders lose everything - either diluted to the point shares are worthless or they cease trading.
I take positively the fact Mooky has not sold any of his 20% stake, so whatever happens to shareholders happens to him. We lose, he loses.
EDIT: just to be clear, I’m not encouraging anyone to buy, nor am I encouraging anyone to sell.
Shorters and day traders have, and are making a killing with this stock so anyone needs to be completely clear on what they are investing in and why they are doing so.