Before the outbreak of COVID and the shutdown of governments around the world, there was many people working in companies which required close contact of people to earn revenues. The entertainment world has many examples and when you think of the entertainment world you might as think about movie theaters. Last year a large British company called Cineworld was interested in a Canadian company called Cineplex and because people were not going to the cinemas as much as they used to, the shareholders of Cineplex jumped for you and accepted the offer by Cineworld. The agreement was suppose to close and Cineworld would bring their management to Cineplex.
In an article by Jeffery Jones of the Globe and Mail, the $2.2 billion merger is off, the shares of Cineplex are down and court cases of who can break the agreement and how much will it costs are slowly going through the court system. In the case of Cineplex, they have vowed to carry on, although when they can open all their screens it will be 30-50% capacity and the popcorn sales which adds added value for the company are expected to be lower. It is a little hard to eat popcorn with a mask on.
Linking to dividend paying stocks, all companies go through cycles which affects them differently. In the COVID situation, some companies benefit from social distancing, some companies do not benefit and it is hard to imagine how they will make money if people have to social distance. When the government shut down the economy, most of us expected 3 months and essentially we would be back to roughly where we were, it will be longer. How much longer dictates your investments, when there are many unknowns, what is most likely is the correct answer. Perfectly good sound judgement a short time ago, may have quickly changed. Having a reasonable diversified portfolio helps you get through to you can make decisions under the new rules.
There are more questions than answers, till the next time – to raising questions.