Hey Alan,
In most of the situations such as you described, that type of near-death investment has far more to do with the liquidation landgrab than any hope of a bounce.
Most of us are familiar with the cases wherein bondholders and secured lenders are the first in line when dissolution becomes the order of the day. However, there are flavors of this, depending upon the structure of the company in terms of debt and equity.
In some rare cases where a company is extremely light in debt, it is worth it for some funds or individuals to scrape up as much cheap equity as they can, particularly if some specific property, inventory, equipment, or patent is up for grabs and they want to be in pole position for it.
The key being that equity stakeholders are of the lowest order of claimant, but are still, in fact, claimants.
LPS5 |
