hpark

you mean the shares trading at 16 cents?

AssassinJN

Yeah

Honest I just meant in general what happens to them. I figured they'd either just be values at 0 and die, or they'd be automatically sold off and the owners would be given their $0.16 per share.

Edit: or now that I think about it, would they get prorated and turned into JPM shares? So 280 or whatever shares would turn into 1 share?

cthree

Toilet paper.

When a company is forced into receivership (as the FDIC did to WaMu) this is what happens:

1) The board of directors are fired and a receiver is appointed to replace them. Everyone now answers to the receiver who calls all the shots.
2) The receiver's job is to liquidate everything and return the proceeds to the bond holders. That means selling off parts of the business and all assets like securities, real estate, equipment and machinery, everything.

In the case of WaMu the bond holder is the FDIC who is on the hook to the bank depositors. The FDIC will do what it needs to do to satisfy refunding the depositors up to $100K per account (and little else)

3) If after the bond holders get paid there is anything left (yeah right!) then the unsecured creditors get paid some or all of what they are owed (usually they get nothing because the receiver works for the bond holders and all they care about is themselves and will fire-sale everything to get as much of their money back as they can as quickly as they can without regard to anyone else who might want a piece). Bond holders aren't responsible for other debts the company might have.
4) If after the bonds are paid and the other creditors are paid there is anything left other than a smoking hole it is handed over to the preferred shareholders who now own the remains.

Common shareholders get zilch, notta, nothing.

This is different from a Chapter 11 bankruptcy BTW which is voluntary and will protect the business from angel of death (the receivers) by appointing a judge to act as receiver who will, in general, work to try and salvage the business or at least get fair value for the assets. This has to be done BEFORE the business defaults on a bond or a secured loan, like if they see it coming but haven't done it yet.

Once the bond or loan defaults the business owner and employees will show up to work the next day to find the ENTIRE BUSINESS gutted and the building nothing but an empty shell with curtains.

The law provides for the bond holder to attempt full compensation. For example, if you run a small business making machine parts and you go to the bank and get a loan to buy a CNC machine and put that machine up as collateral and you later fail to make a payment on that loan, the bank has the right to seize that machine (it's theirs for the taking and you can't stop them) PLUS anything else they can get their hands on to "reasonably" make up the difference between the money owed and what the machine is worth at auction. ie. they take EVERYTHING illiquid, furniture, inventory, computers, other machinery, everything.

It's a pretty ugly affair.

If however you realize that you aren't going to have the money to pay the loan, especially if you've got a balloon payment coming due and haven't found a way to pay it, then you can file for Chapter 11 and prevent receivership and get protection for the creditors.

Demand loans are instant death.

It's a bit of a tangent but I thought I'd share anyway.

When you invest in a company, public or private, it's important that you do the due diligence to fully understand where you will sit on the food chain. A business may have more assets than liabilities but if the secured debt exceeds the liquid assets and there isn't ample cash flow to keep the debt out of default you can very quickly lose that entire investment. Debt to equity, debt to current assets and MOST IMPORTANTLY statement of cash flows, all very important to understand and stay on top of.

CASH FLOW IS EVERYTHING It's the pulse of the business. No cash flow, no pulse, no business. The income statement is the LEAST important financial statement a business produces.

FYI

lOOkatme

CTHREE...weren't you selling GM and WM pretty hard a while back.


LOL


cash flow for life

sahtt

Yep.

espelirS2K

Is it so wrong to hope? .

AssassinJN

Thanks cthree.

Thorough as usual.

ExOdy

I've officially hit down 40% for the year.

b00stn

If you already owned JPM/Chase prior to the WM buyout, would you be interested in your share of the stock pool being diluted with a bunch of garbage stock from WM?

stockae92

you are once step ahead of me, but i am not far behind