Investment Talk

[SARGE]

Just wondering. American Airlines (AMR) going bankrupt and its shares are at $.39 a share. We all know that AA can't pass away, it's an institution we all need. Is it a good time to invest in AA during bankruptcy or would your investments be taken by the courts?

[doubledragon5]

If your a risk taker, go for it.. At .39 you could buy one thousand for $390.

[glc]

We all know that AA can't pass away, it's an institution we all need.

Don't count on that - other major airlines have disappeared in the past. However, you've spent a lot more on your computer toys than you would spend for 1000 shares.........

Note that most investment houses have a surcharge on their commission for buying penny stocks.

[edfair]

The linked site suggests extreme caution and notes that most companies end up with their previous stock cancelled, which means total loss of whatever the investor (gambler) paid for it.

If you could get a stock certificate it might be worth buying as a conversation piece but they don't provide certificates any more.

Corporate Bankruptcy

I will admit to an impulse to buy SCO, the software house that sued IBM for the 5 billion and lost everything in the courts, but the efforts involved would not have given much more pleasure than watching the quoted price go to $.00.

[glc]

After reading that article, I would advise you to wait till they come out of bankruptcy. Buying AMR now may be like flushing your money down the toilet, your money will probably all go to secured creditors.

[David M]

No Sarge!...don't even think about it. Never bottom feed!

What usually happens, but not always, with airline bankruptcies (Under Chapter 11 or 13..not sure which it might be) is that the company will reorganize. (become a new entity). What this also means is that the current shares stop trading, which means the value effectively goes to zero. The company issues new shares as a new company. What this does is eliminate all their debt (leaving their debtors holding the bag) The new company keeps the assets and hires pretty much the same employees that worked for the old company.

Chapter 7 is where the company is dissolved (assets are sold off to partially pay down the creditors) which I doubt will happen. PanAm and a few other airlines went out of business in this way. AA might go away which would be kinda sad.

Airlines historically are a horrible investment because of the fierce competition which causes very narrow profit margins, if they are making any profit at all. The only airline that consistently makes a quarterly profit is Southwest (LUV), and their margin is slim.

[edfair]

quote GLC:
"your money will probably all go to secured creditors."

No George, the money would go to someone who is anxiously attempting to get some of his money back before the sucker goes splat.

Stock money only goes to the company when they IPO or authorize additional shares.

[glc]

Oh?

Note: Investors should be cautious when buying common stock of companies in Chapter 11 bankruptcy. It is extremely risky and is likely to lead to financial loss. Although a company may emerge from bankruptcy as a viable entity, generally, the creditors and the bondholders become the new owners of the shares. In most instances, the company's plan of reorganization will cancel the existing equity shares. This happens in bankruptcy cases because secured and unsecured creditors are paid from the company's assets before common stockholders. And in situations where shareholders do participate in the plan, their shares are usually subject to substantial dilution.

[edfair]

Probably would be better said that the creditors and bondholders become owners by being given new shares in exchange for any debts not settled. The old shares become worthless in most cases unless provisions are made in the bankruptcy.
If the BK court cancels the existing equitable intrest in the corporation Sarge would still own the shares, they would be worthless, and the stock certificates would just be good for papering the house.

[SARGE]

I have my answers. Thanks.

[quartet-man]

Sarge, you could invest in the quartet-man needs a desktop fund.

[jessho]

From my experience with dealing with a company in bankruptcy, a plan of what is acceptable to the creditors is voted on and the final result is usually pennies on the dollar to creditors. The hope is that the reduced cost to the company will allow it to recover and continue in business. Until that happens, the doors could eventually be closed after all remaining assets are liquidated.

[David M]

It depends on which chapter the bankruptcy is done under as to how things are executed and it depends on the decisions of the bankruptcy judge. Chapter 7, 11 and 13 are done differently. No outcome is the same.

[Nuclear Krusader]

Originally Posted by quartet-man Sarge, you could invest in the quartet-man needs a desktop fund.

Here's your desk, quartet.

[David M]

At least now you can track where your desk is located.

[quartet-man]

I had an inkling that even on a computer forum, my not specifying computer was going to get some people out of the gallery. How about parts to have a computer built (recommended by some of the greats here of course)?

[Nuclear Krusader]

Here's your hard drive, Quartet-mensch.

[quartet-man]

Don't force me to start liking posts of yours.

[Nuclear Krusader]

Wait till you see the monitor…

[David M]

http://www.google.com/imgres?hl=en&s...5&tx=107&ty=31

[Nuclear Krusader]

That must be the future iMac with the future Mac OS 10.8: Kitty.

[glc]

[Nuclear Krusader]

That must be M$'s attempt at imitating a Mac!

[glc]

Comes with OS 10.9 - Poopy.

[rwest]

Originally Posted by glc

So what part of the computer is that?

Here's a flash drive for ya:
http://images.halloweencostumes.com/...he-flasher.jpg

[bob]

They would need to be bought out to make money. If not you lose all. That is the bet.

[quartet-man]

Originally Posted by rwest So what part of the computer is that? Here's a flash drive for ya: http://images.halloweencostumes.com/...he-flasher.jpg

I prefer this one:
http://www.crazyabouttv.com/Images/flash.jpg