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It isn't shareholder capital; it's almost always creditor capital when a public company is going bankrupt. It's a broken process when creditors don't get a vote
by lend000 6y ago
It isn't shareholder capital; it's almost always creditor capital when a public company is going bankrupt. It's a broken process when creditors don't get a vote in whether a company can apply for Chapter 11 bankruptcy (as opposed to Chapter 7 where the company assets are just liquidated). It incentivizes shareholders to vote for Chapter 11 because they know during a Chapter 7 their shares will be worthless anyway, because there won't be much (if anything) left after paying off debt.
- hedora 6y agoIt’s not just creditors that get screwed. Many of these companies have pension plans that will likely be zeroed out during bankruptcy. Also, if the company no longer exists (or contracts to cover the bonuses), then it stops serving whatever societal purposes it used to serve. For retail, all the infrastructure supporting the malls ends up being wasted, suppliers go bankrupt, communities lose jobs, neighboring stores fail once the mall loses its anchor store, etc, etc.