The Liability Of Common Shares

[Nobert]

Given the fact that one would have no right (especially a tiny retailer like me) to claim any rights to the assets of the company, during the event of Chapter 11, would it be right to assume, that in order to weight his risk properly, simple retailer should be buying equities, that represents the value of 50% below the fair price of an equity ?

Simply put, even by paying a fair price for a common stock, you're still exposed to the risk so much, where you're almost over-paying ?

Thank you.

 

[Scataphagos]

Given the fact that one would have no right (especially a tiny retailer like me) to claim any rights to the assets of the company, during the event of Chapter 11, would it be right to assume, that in order to weight his risk properly, simple retailer should be buying equities, that represents the value of 50% below the fair price of an equity ?

Simply put, even by paying a fair price for a common stock, you're still exposed to the risk so much, where you're almost over-paying ?

Thank you.

None of this should ever matter to you. To claim "your share" of the assets, simply sell your stock. You should have a stop (hard or "in mind") at all times.

 

[Daal]

Given the fact that one would have no right (especially a tiny retailer like me) to claim any rights to the assets of the company, during the event of Chapter 11, would it be right to assume, that in order to weight his risk properly, simple retailer should be buying equities, that represents the value of 50% below the fair price of an equity ?

Simply put, even by paying a fair price for a common stock, you're still exposed to the risk so much, where you're almost over-paying ?

Thank you.

Whether you are a retail investor or not, the vast majority of stocks are worth nothing in bankruptcy. Buying 50% bellow fair price is a good rule but not for the reasons you mentioned

 

[murray t turtle]

Given the fact that one would have no right (especially a tiny retailer like me) to claim any rights to the assets of the company, during the event of Chapter 11, would it be right to assume, that in order to weight his risk properly, simple retailer should be buying equities, that represents the value of 50% below the fair price of an equity ?

Simply put, even by paying a fair price for a common stock, you're still exposed to the risk so much, where you're almost over-paying ?

Thank you.

%%
50% off sale can be a winner;
but in the [specific]case you mentioned Nobert , sounds like its going to zero\goose egg. Put another way, why pay up for a house on fire?? IT could easy \be worth LESS than zero.

 

[Nobert]

%%
50% off sale can be a winner;
but in the [specific]case you mentioned Nobert , sounds like its going to zero\goose egg. Put another way, why pay up for a house on fire?? IT could easy \be worth LESS than zero.

Hey Murray,

yes you're right. No reason to jump into a sinking boat.
But what i had in mind,it's where the equity looked like a great investment in the first place but then for whatever ,,unexpected'' reason things went south.

Thus to avoid even the slightest chance of this happening... [stops in the middle of writing]
- sounds like perfectionism. Proper position sizing is the simplest solution.

Case closed

 

[murray t turtle]

Hey Murray,

yes you're right. No reason to jump into a sinking boat.
But what i had in mind,it's where the equity looked like a great investment in the first place but then for whatever ,,unexpected'' reason things went south.

Thus to avoid even the slightest chance of this happening... [stops in the middle of writing]
- sounds like perfectionism. Proper position sizing is the simplest solution.

Case closed

%%
YES, proper position size sounds like the best.
Single stocks do have a different risk reward;
under $5 is much more risk+ applies especially to your question.

 

[Bastion_01]

Given the fact that one would have no right (especially a tiny retailer like me) to claim any rights to the assets of the company, during the event of Chapter 11, would it be right to assume, that in order to weight his risk properly, simple retailer should be buying equities, that represents the value of 50% below the fair price of an equity ?

Simply put, even by paying a fair price for a common stock, you're still exposed to the risk so much, where you're almost over-paying ?

Thank you.

you make a good point, and this is not even considering that most companies collapse over time, according to this HBR essay https://hbr.org/2016/12/the-scary-truth-about-corporate-survival