Who is on the other side of KM Trades?
- Thread starter nitro
- Start date
KM might issue new stock to it's creditors and let the old stock
go to zero? I guess I had better plan on buying a new rowboat
intstead of a yacht. Where did you hear this story? I hope it
wasn't on the KM message board on Yahoo. Shorts can come up
with some incredible stuff on those boards.
I also thought KM was only going to close 250 stores? And they
are closing 284 with the option of closing more on a store by
store basis? They might just end up closing every single one!
Ouch!
go to zero? I guess I had better plan on buying a new rowboat
intstead of a yacht. Where did you hear this story? I hope it
wasn't on the KM message board on Yahoo. Shorts can come up
with some incredible stuff on those boards.
I also thought KM was only going to close 250 stores? And they
are closing 284 with the option of closing more on a store by
store basis? They might just end up closing every single one!
Ouch!
version,
As I said above, I heard it on CNBC by Chuck Lebau (it seems every 5 minutes CNBC is covering KM now.) While thinking about it, it makes perfect sense.
If you were a (new) creditor, and you believed that KM was a viable business, yes, you would invest. _BUT_, you wouldn't want your money to go to the old creditors - what the hell would be in it for you then? Sooo, the company raised money by issuing new _____ (fill in the blank, I don't know if it would be convertible bonds, or some other convertible. I knew studing for that Series 7 would be worth something some day
)Now, the "new" company has no desire to pay it's old debt anymore to the creditors it filed bankruptcy to - just let that stock, etc go to zero.
What I don't understand is, how is this legal? If it is legal, it may still be suicide, as if some of the old creditors are businesses you have to do do business with again (e.g., Martha Stewart) you had better pay up otherwise the new company may not be doing business with it either (how many suppliers are there out there?)
In either case, I had no problem with my dad taking a shot at KM. However, if the company itself becomes it's own shareholders enemy, well then, gee, who the hell is left standing being your "friend?" I advised my dad of this - he is not getting "shaken out."
nitro
That's usually the effect of a re-organization - the company is "re-capitalized" as part of the plan. Usually, the stock is _already_ worthless, if you look at the stockholders' equity on the balance sheet. They simply declare it as such and move on.
Also, it seems that in the cases where a company actually succeeds in re-organizing, there is not usually a public market for the new stock, at least not for some years, since it is all held by the creditors or takeover guys, and individuals probably wouldn't want to pay anywhere near what the creditors want for it.
*** This is just general commentary on bankruptcies - I have no idea what KM is planning to do.
I talked to a money manager from Merryl Lynch about this. He gave me some good arguments that make me feel much better about this.
Some rumors about a French company interested in buying KM in order to compete with WMT, etc in the US.
The rumors subsided, but I think they are back again. Interestingly enough, I see good arguments as to why WMT would buy KM - they have very little presence in the core cities, and buying them would prevent others from competing...
Any comments?
nitro