Re: [CANSLIM] Off-CANSLIM: Common stock post-Chapter 11?

From: Spencer48@aol.com
Subject: Re: [CANSLIM] Off-CANSLIM: Common stock post-Chapter 11?
Date: Sun, 28 Jul 2002 22:18:49 EDT

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Tom:

     Does this mean that any bankrupt company that forms itself into a new 
entity (perhaps by changing its name) can avoid its obligation to its common 
shareholders because now the old shareholders are owners of a bankrupt 
company?  

     So the newly formed company can once again sell shares in the new 
company (while legally ignoring its fiduciary obligations (for instance, 
paying the old shareholders from any company assets left over after the 
secured creditors and preferred shareholders are paid) the shareholders of 
its old company?

     Isn't this (don't you think) like a legally sanctioned Ponzi scheme-ie, 
the corporation big-boys are legally benefitting from running the company 
into the ground?

jans


In a message dated 7/28/2002 9:24:55 PM Eastern Daylight Time, 
stkguru@bellsouth.net writes:

<< The typical scenario is that a new corp is created, in which ownership is 
by the secured creditors of the old corp, and possibly a partial ownership by 
the unsecured  creditors. Rarely do the common stock shareholders get any 
ownership in the new corp. The assets are transferred to the new corp, 
remaining debts are left with the old. The secured creditors swap their claim 
on assets of the old corp for ownership in the new corp. Net result, 
shareholders are left with shares in a shell corp, owning only debt and no 
assets>>

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