Cineworld shares surge as traders fight back against short-sellers

LaToya Harding
·Contributor
·3-min read
Cineworld in Leicester's Square, London. Photo: Henry Nicholls/Reuters
Cineworld in Leicester's Square, London. Photo: Henry Nicholls/Reuters

Cineworld (CINE.L) shares jumped as much as 15% on Wednesday as traders continue to boost heavily-shorted stocks.

The cinema chain, which is the second most shorted UK listed company, according to Short Tracker, follows in the footsteps of GameStop (GME), which has soared more than 700% since the start of the year.

Cineworld shares soared on Wednesday. Chart: Yahoo Finance
Cineworld shares soared on Wednesday. Chart: Yahoo Finance

The video game retailer has surged recently as short-sellers and reddit WallStreetBets users clashed causing a massive short squeeze on the stock. A short squeeze forces those who bet against the stock to buy in order to forestall bigger losses, sending the stock price much higher.

On Tuesday GameStop closed 92.7% higher at $147.98 (£107), boosted by a tweet by Tesla (TSLA) chief executive Elon Musk. It is already up more than 100% pre-market on Wednesday.

GameStop started the year at $17, and trading has been halted multiple times in an attempt to calm volatility.

Last week Citron Reserach tweeted GameStop stock would be “back to $20 fast”, describing GameStop buyers as “suckers in this poker game.”

Chart: Yahoo Finance
GameStop started the year at $17 and trading has been halted multiple times in an attempt to calm volatility. Chart: Yahoo Finance

Russ Mould of AJ Bell said: “Video games seller GameStop or ‘GameStonk’, to use the vernacular from Tesla founder Elon Musk’s tweet, continues to surge with Musk’s remark on Twitter prompting further gains and taking the company’s valuation into the tens of billions of dollars.

“Amateur investors on social media platform Reddit are engaged in a battle with hedge funds which are shorting GameStop (and several other stocks including Blackberry and Virgin Galactic) raising fears about a bubble in the markets given these stocks are being backed on little tangible news.”

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Pearson (PSON.L) shares are also among the biggest risers on the FTSE 100 (^FTSE), up as much as 15% on Wednesday. A relatively large amount of the stock has been shorted and it is currently the third highest shorted UK stock after Cineworld.

Earlier this week, a third of Cineworld shareholders rebelled against plans to pay the company’s bosses share-based awards worth up to £208m ($286m).

At a shareholder meeting on Monday, 30% of investors voted against the cinema chain’s long-term incentive plan, which could give Mooky Greidinger, Cineworld’s chief executive, and his brother Israel Greidinger up to £65m each.

However, some 69.25% of investors waived through the company’s new remuneration policy, with 30.75% voting against.

Executives at Britain’s largest cinema chain, which also owns Picturehouse and Regal, could be in line for a share of between £104m and £208m, if the share price reaches 190p, close to pre-pandemic levels, over the next three years.

The scheme required 50% shareholder support.

READ MORE: Cineworld 'to shut' all cinemas in the UK and Ireland risking 5,500 jobs

Cineworld closed its cinemas in the UK and the US indefinitely in October 2020. Thousands of Cineworld staff in Britain are currently on furlough as all 127 of its UK sites remain closed due to the coronavirus pandemic.

The industry had been rattled by a number of blockbuster film delays, such as Marvel’s Black Widow and the latest James Bond film No Time To Die.

The 25th Bond film was initially due to be released in cinemas in April 2020 but was then pushed back until November. Beverly Hills-based MGM, the Hollywood studio behind James Bond, has now pushed the film back for a third time from April to October 2021.

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