AboutPaul Henneman Expertise Stock forecasting and fair market valuations.
Experience
Past/Present clients CBSMarketwatch.com, Hoovers.com, Multexinvestor.com, Bank of NY, numerous hedge funds and institutions, other partners and clients can be viewed at http://www.valuengine.com/about/careers.html
Question QUESTION: Hi! Paul,
After Lehman Bros. filed bankruptcy protection, I find that its shares is trading today. Why people are still interested in a to be bankrupted stock? Tks.
ANSWER: Raymond,
Thank you for your question! A bankrupt company still continues to exist and operate, bankruptcy means that the company is seeking protection from its creditors. Generally what happens is that a court or board is appointed to decide what to do with the company in order to pay off its debts. Many things can result, such as selling off assets, or simply continuing to operate but restructure a bit to increase profits. Typically debtors come before shareholders, but if there are enough assets so that the debtors can be paid off, or if the company continues to operate in some form, it is possible that the shareholders can still make money. There is a wide array of possible scenarios, but ultimately it certainly would be a very risky investment to but Lehman Brothers stock now!
Here is a great link that goes into the specifics in more detail, including chapter 7 versus chapter 11 bankruptcy. This is from the goverment's SEC main website so it is a reliable source:
I hope that helps, please do not hesitate to follow up with me if I can be of any additional service!
Sincerely,
Paul Henneman
President
ValuEngine Inc
www.ValuEngine.com
---------- FOLLOW-UP ----------
QUESTION: Paul,
Tks. What you said was what I thought. In theory, a bankrupt company means that it's assets couldn't fully settle it's debt (creditors). There should have nothing left for share holders, right?
I would also like to know roughly how long does it take for share holders to get the money, if any. When the company will go from bankruptcy to liquidation?
Answer Raymond,
Thank you for your follow up question! Unfortunately this is hard to answer. Every bankruptcy is different, sometimes there is something for the shareholders, sometimes not. The time frame before this is all figured out can also vary from months to years. It looks like there are some deals pending where other organizations may buy up various Lehman assets. This would tend to speed up the process, but it is still very difficult to say how long the complete process will take. No matter how you look at it, it is not a good situation for shareholders!
Best Regards,
Paul Henneman
President
ValuEngine Inc
www.ValuEngine.com
