By Scott Kanowsky
Investing.com -- Shares in Cineworld Group (LON:CINE) plummeted on Friday, adding on to sharp losses earlier this week, on reports that the U.K. movie theater chain is preparing to file for bankruptcy.
The company has engaged lawyers to advise on the process and is set to file a Chapter 11 petition in the U.S. for bankruptcy within weeks, according to the Wall Street Journal. It is also eyeing insolvency proceedings in the U.K., the paper added.
On Wednesday, Cineworld warned it may have to dilute shareholders with a massive balance sheet restructuring.
The group, which owns the Regal chain in the U.S. and the Picturehouse chain in Britain, said it is "evaluating various strategic options to both obtain additional liquidity and potentially restructure its balance sheet through a comprehensive deleveraging transaction."
"Any deleveraging transaction will likely result in very significant dilution of existing equity interests in Cineworld," it added.
The update comes as Cineworld has seen weak trading throughout the year, with the business failing to entice filmgoers to visit its cinemas despite the lifting of pandemic restrictions.
Cineworld said it has recent admission levels below expectations despite a "gradual recovery" in demand since it re-opened its doors in April 2021. Liquidity and trading have also been hit by a limited film slate until November this year, the firm added.
Meanwhile, Cineworld's balance sheet is under serious strain from an order to pay $970M in damages to Canada-based rival Cineplex for abandoning an agreed takeover after the pandemic struck. Cineworld is appealing the decision.
By 10:25 EST (14:25 GMT), Cineworld shares were trading down 72.82% at £2.65 after they slid to as low as £1.80. The stock has lost nearly 85% of its value over the last one-year period.