Chapter 11 and Stocks

Bubblegum86 wrote: ↑ I am wondering what happens to stocks when a company goes into Chapter 11 and comes out on the other end without seizing operation.

Looking at buying Hertz stock should it go down to pennies. I know it is risky and i might loose it all, but what happens to my stock when chapter 11 is over? (I am an optimist and just cant see a company like Hertz go belly up).

There's a good chance they file then restructure and issue new shares and you can trade your 10k for 10. Dilution at it's best. Could be wrong but the risk is likely not worth it.

Bubblegum86 wrote: ↑ I am wondering what happens to stocks when a company goes into Chapter 11 and comes out on the other end without seizing operation.

Looking at buying Hertz stock should it go down to pennies. I know it is risky and i might loose it all, but what happens to my stock when chapter 11 is over? (I am an optimist and just cant see a company like Hertz go belly up).

Stocks will lost almost all of their value when a company files bankruptcy. Remember Air Canada stocks? They went from few hundred to few pennies. LOL

It's a risky bet, but the payout can be huge if you time it right.

TuxedoBlack wrote: ↑ Stocks will lost almost all of their value when a company files bankruptcy. Remember Air Canada stocks? They went from few hundred to few pennies. LOL

It's a risky bet, but the payout can be huge if you time it right.

Did not know about Air Canada. Thanks for the input from everyone! I will "invest" a small amount.

TuxedoBlack wrote: ↑ Stocks will lost almost all of their value when a company files bankruptcy. Remember Air Canada stocks? They went from few hundred to few pennies. LOL

It's a risky bet, but the payout can be huge if you time it right.

Air canada is going to be a rinse and repeat.

TuxedoBlack wrote: ↑ Stocks will lost almost all of their value when a company files bankruptcy. Remember Air Canada stocks? They went from few hundred to few pennies. LOL

It's a risky bet, but the payout can be huge if you time it right.

The only times it usually works out from my short memory is if it's a too big to fail company because they get the bailouts they need. Think GM, BAC etc. I do not consider Hertz to be a too big to fail company.

"Think GM"

except, shareholders lost everything

and if hertz goes to pennies, op will too

edit: you can read what happened to GM here https://en.wikipedia.org/wiki/ and check out the original GM stock as MTLQQ

JC Penny confirmed

zoro69 wrote: ↑ "Think GM"

except, shareholders lost everything

and if hertz goes to pennies, op will too

edit: you can read what happened to GM here https://en.wikipedia.org/wiki/ and check out the original GM stock as MTLQQ

In most cases, whether a Chapter 11 or Chapter 7 bankruptcy filing, existing common, and usually preferred as well, stockholders will not even receive a few pennies for their shares* (*unless they can manage to trade them on the secondary market).

The original General Motors Corporation lives on the form of the Motors Liquidation Company General Unsecured Creditors Trust, administered by Wilmington Trust, and there have been recent news releases and filings as recent as this month...https://www.mlcguctrust.com/Page.aspx?Name=Home

Original GM bondholders are still looking to receive their pennies on their dollars owed.

Cheers,
Doug

If you want to go further down the MLC rabbit hole, there's another trust called the RACER Trust, administered by a law firm, that acquired most of the real properties of MLC GUC Trust, and it's been selling them off as industrial land in the hope that they will be revitalized as, presumably, warehouses, logistics facilities, or other commercial or industrial endeavours.

Check it out at: https://www.racertrust.org/properties/

The Fiero Assembly Plant Parking Lot is still available for sale, with annual property taxes of ~$6,000 and an assessed value of ~$110,000, https://www.racertrust.org/properties/f ... arking-lot.

https://www.racertrust.org/application/ ... ochure.pdf

Cheers,
Doug

TGokou wrote: ↑ The only times it usually works out from my short memory is if it's a too big to fail company because they get the bailouts they need. Think GM, BAC etc. I do not consider Hertz to be a too big to fail company.

I would reexamine your information on what happens to these companies. Yes, they may be deemed "too big to fail" but that doesn't mean shareholders don't go broke. In reality, it all but ensures it.

djdestroyer wrote: ↑ I would reexamine your information on what happens to these companies. Yes, they may be deemed "too big to fail" but that doesn't mean shareholders don't go broke. In reality, it all but ensures it.

Haha your right...GM shareholders did go broke so that was my bad for listing it. BAC did make it through but barely.

djdestroyer wrote: ↑ I would reexamine your information on what happens to these companies. Yes, they may be deemed "too big to fail" but that doesn't mean shareholders don't go broke. In reality, it all but ensures it.

Good point, @djdestroyer. Yes, in that case, the actual original bankruptcy of General Motors Corporation was handled and completed inside of a month. General Motors Corporation became Motors Liquidation Company, and the "good assets" were transferred to General Motors Company with the equity held by the secured and certain other senior unsecured creditors of General Motors Corporation to fully or partially satisfy their claims as a creditor, joining global governments who were also given equity stakes in General Motors Company. Existing shareholders continued as Motors Liquidation Company shareholders. I wonder if any of them still holds Motors Liquidation Company GUC Trust units that still trade over-the-counter.

Same story with original Lehman Brothers shareholders or even Washington Mutual shareholders. Or Bear Stearns. Or Merrill Lynch. They were wiped out. I challenge anyone to show me that any one of those shareholders receive some or all of their shares in the form of JPMorgan Chase Bank or Bank of America shares.

Cheers,
Doug

It gets weirder when you include Fannie Mae and Freddie Mac. The U.S. government placed them into a conservatorship and holds preferred stock. Together with the conservatorship and preferred stock, they have been getting substantial dividends every year from what are effectively mortgage guarantors. Hedge funds and other speculators bought up the lower ranking existing preferred stock, bonds, and common shares, but they've not seen a dime, and may never, if the government keeps it in an indefinite conservatorship.

AIG might be the exception, though existing shareholders were massively diluted by the government's stake, which has since been sold.

Cheers,
Doug

Motors Liquidation Company GUC Trust (OTC Pink Sheets: MTLQU) still trades on OTC Markets' Pink Sheets bulletin board exchange. There's obviously been a reverse stock/unit split, as there's only 30 million units outstanding, which a market capitalization of ~$317 million, as at the most recent trading date. The trust does have ~$500 million in assets held by the trustee, so MLC GUC Trust unitholders will definitely be unsecured creditors, but they join many other former GM creditors who've yet to be paid, so if they get anything more than a few pennies per unit, I'd be very surprised.

Surprised we even allow bankrupt companies to trade on any sort of regulated or unregulated secondary market.

Cheers,
Doug

dmehus wrote: ↑ Motors Liquidation Company GUC Trust (OTC Pink Sheets: MTLQU) still trades on OTC Markets' Pink Sheets bulletin board exchange. There's obviously been a reverse stock/unit split, as there's only 30 million units outstanding, which a market capitalization of ~$317 million, as at the most recent trading date. The trust does have ~$500 million in assets held by the trustee, so MLC GUC Trust unitholders will definitely be unsecured creditors, but they join many other former GM creditors who've yet to be paid, so if they get anything more than a few pennies per unit, I'd be very surprised.

Surprised we even allow bankrupt companies to trade on any sort of regulated or unregulated secondary market.

Cheers,
Doug

It's kinda crazy...

Looks like Hertz did not come to an agreement and will be filling for Chapter 11 in the next few days. Stock dropped like a rock after hours.