When a publicly traded company goes bankrupt, when is it announced? For example, are there set rules concerning when the announcement is made? Say before the start of the day 9:30 or only after the trading day is over 4:00? Or can it be at any time of the day when the stock is delisted? I'm trying to understand what would happen if you were day trading with a stock that was about to go belly up.
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stock bankruptcy question
- Thread starter dde12
- Start date
When a publicly traded company goes bankrupt, when is it announced? For example, are there set rules concerning when the announcement is made? Say before the start of the day 9:30 or only after the trading day is over 4:00? Or can it be at any time of the day when the stock is delisted? I'm trying to understand what would happen if you were day trading with a stock that was about to go belly up.
price sensitive news is normally released early or after. if it's announced during normal trading the stock will be temporarily halted beforehand, until the news is released.
usually a company is delisted long before bankruptcy. one that goes from listed company (i.e. not pink sheets etc) to bankruptcy usually will make front page headlines. It is a big deal if bankruptcy has not been telegraphed.
if you are trading those kinds of equities, and have never worked in distressed assets, in a workout group at a bank, or have any experience in the space, then i should give you a warning about how in the dark you are. It is a confluence of legal discussions, cash flow forecasts, who controls the company (the creditors / banks if there is debt where interest can't be covered) union negotiations etc.
Although i was neither a distressed trader nor pure corporate advisory, i have advised companies on this before, and i have been part of creditor groups on several occasions that have negotiated distressed deals into bankruptcy. A lot of competing interests and heated discussions. You have so many moving parts - taxes, unions, can you find the right team to do something with it, or are there any in the industry you could lure? Could you line up independent financing for a financial buyer if no strategics will bite? Are you willing to indemnify for certain liabilities...too many to list. When do you decide to just throw in the towel?
Rarely do you just decide "overnight" and you will have made representations as a going concern in your financial statements.
if you are trading those kinds of equities, and have never worked in distressed assets, in a workout group at a bank, or have any experience in the space, then i should give you a warning about how in the dark you are. It is a confluence of legal discussions, cash flow forecasts, who controls the company (the creditors / banks if there is debt where interest can't be covered) union negotiations etc.
Although i was neither a distressed trader nor pure corporate advisory, i have advised companies on this before, and i have been part of creditor groups on several occasions that have negotiated distressed deals into bankruptcy. A lot of competing interests and heated discussions. You have so many moving parts - taxes, unions, can you find the right team to do something with it, or are there any in the industry you could lure? Could you line up independent financing for a financial buyer if no strategics will bite? Are you willing to indemnify for certain liabilities...too many to list. When do you decide to just throw in the towel?
Rarely do you just decide "overnight" and you will have made representations as a going concern in your financial statements.
Although now that i am thinking about it the exchanges have seemed a bit lazy. For example, Molycorp filed this summer and was still listed. But if you read the public filings, you would already know they missed an interest payment (this is huge), and had an unusual "going concern" half page footnote in its financial statements (also huge). Why the exchange did not delist them boggles my mind. (in short they are stupid and lack resources and just want to collect fees)
You need to absolutely have a trigger finger on SEC Edgar before entering a potential trade with a company that could be distressed. The lawyers require all this stuff otherwise executives may to jail. (you can't really protect yourself against fraud though). Read the 8k's and 10k's and 10-q's. If you don't know how to read them, or follow them, or what is an unusual "cover your ass" note that was not there previously, you should stick to well performing companies.
You need to absolutely have a trigger finger on SEC Edgar before entering a potential trade with a company that could be distressed. The lawyers require all this stuff otherwise executives may to jail. (you can't really protect yourself against fraud though). Read the 8k's and 10k's and 10-q's. If you don't know how to read them, or follow them, or what is an unusual "cover your ass" note that was not there previously, you should stick to well performing companies.