G: I'm glad you figured out that WIM "is or will be in financial difficulties." No duh! It's been obvious for some time now that the company took on too much debt at the wrong time and is paying the price. What you have failed to figure out, though, is that the stock at recent levels (i.e. 25-50 cents Canadian) is nothing but a long term option. The proper way to value it would be to run a Black-Scholes model to see what it's worth as an option, rather than as a stock.
If you were shorting this stock at 25 cents, you were brave indeed. Most stocks I have seen trade for more than that, even AFTER the issuers file for bankruptcy. Investors in general have an amazing tendency to believe that somehow, some way, their stocks will prove to be worth something. Discovery Zone stock even shot up to US$1.00 after the stock was canceled! Of course, that was because some poor saps didn't understand the difference between the new stock that was being issued to creditors and the old stock that was being canceled. That only lasted a few weeks until the NASD decided it was silly to allow investors to buy something that was worthless, but more than 10 million shares traded in the meantime.
Again, if you really expect WIM to go to zero, you had better figure out how and when the company is going to run out of cash. If you figure that out, please share your analysis. But even if that happens, be prepared for a long and bumpy ride through bankruptcy, because hope dies hard. |
