(CapitalWatch, Oct. 26, New York) Chinese cinema operator Cine Top Culture Holdings Ltd. has applied for an initial public offering on the Nasdaq, seeking to upturn the bear market and raise up to $18.4 million.
Based in Guangzhou, Cine Top Culture develops and operates four high-end cinemas in southern China. It also has three new cinemas under construction – these will add 26 screens to the existing 31 screens. However, the launch date of these has been postponed indefinitely due to Covid-related delays, according to the prospectus filed with the U.S. SEC.
Cine Top Culture generates revenue from ticket sales (83.2%), concessions (12%), and movie-related merchandise. Secondary sources of revenue are adverts and sponsorship (0.2%), as well as sub-lease of spaces at the cinemas to third-party commercial operators (4.6%).
In the first half of 2022, Cine Top Culture booked doubled net loss, at $1.6 million. Revenue declined 37% year-over-year to $1.2 million. For 2021, the company reported $2.38 million in net loss on revenue of $3.2 million, up 123% from 2020.
Like just about all businesses relying on public presence, Cine Top Culture suffered in 2020 when the pandemic broke out. U.S. investors have likely heard about the near-bankruptcy state of the world's largest movie chain, AMC Entertainment (NYSE: AMC). Only in 2021, AMC told investors that bankruptcy was off the table as it raised new cash in a debt-and-equity mix. Meanwhile, Chinese conglomerate Dalian Wanda Group had dumped its controlling position in AMC.
As Cine Top Culture wrote in its filing, in 2021, it recovered, except at its Baiyun theater, where the customer flow has been reduced due to the local redevelopment plan. Further, in the first half of 2022, several of the company's theaters were closed again for limited periods under the government's strict control of the Omicron variant spread.
Cine Top Culture said in its filing that its auditors "have substantial doubt as to our ability to continue," but the company's main shareholders pledged to "to fund any working capital deficit." The company added that it expects to "meet our anticipated working capital requirements and capital expenditures in the ordinary course of business for the next 12 months."
The IPO capital will fund the ongoing construction of Cine Top Culture's new cinemas, the acquisition of new ones, the upgrade of existing theaters, and general corporate purposes, as the prospectus stated.
Cine Top Culture is offering 4.6 million ordinary shares at $4 apiece. The company expects to become publicly traded on the Nasdaq Capital Market under the stock symbol "CJOY." Underwriting the deal is Univest Securities, LLC.