UNDER A BUCK: FPA Medical Management Still Trades. Why?
By RICK STINE
A Dow Jones Newswires Column
NEW YORK -- My boss teases me every so often about some of the companies
I write about.
Can't you write about a company whose shares trade for more than $1?
Maybe you ought to write a column and call it "Under A Dollar."
Well, I guess you can say I listened to him part of the way. But I'm
calling the column "Under A Buck" instead. There really are plenty of
companies out there whose shares trade for under a buck. If you come
across any interesting stories, give me a call or drop me a line at my
e-mail address below.
One reader has done just that. I received an e-mail earlier Wednesday
about a troubled company I wrote quite a bit about last year. The
company is FPA Medical Management Inc. (FPAMQ) and my e-mail pal had a
simple question: Why is this stock still trading?
Now, sometimes traders and investors will rhetorically ask that question
when referring to a company that's in bad shape. It's another way of
saying "who in their right mind would buy that stock."
But in this case, the question really is: Why is this stock still
trading?
Here's why.
FPA Medical Management was a health care management company that grew
too fast. It ran out of money, couldn't pay interest on bonds and was
forced to file for Chapter 11 bankruptcy protection last July.
In May of this year, the bankruptcy court approved the plan of
reorganization, which essentially resulted in selling most of the
company's assets. Proceeds were used to pay off debtors.
And the common stock? Well, I wrote more than a year ago that in Chapter
11 bankruptcy proceedings, shareholders rarely received much, if
anything, in a reorganization.
Under the plan approved in May, the common stock was cancelled.
The effective date for cancelling the stock: July 8.
Yet, the stock still trades. Even though it doesn't exist.
Granted, the stock traded for 4 cents a share at one point Wednesday.
It's now at a penny. But nearly 200,000 shares have traded since the
stock was cancelled. About 34,500 shares have traded so far on
Wednesday.
It's certainly true that you can't buy much for a penny anymore.
In this case, it doesn't buy you anything.
By Rick Stine (201) 938-5151
e-mail: rick.stine@dowjones.com
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