17 Signs You Work With free random chat

Posted by Allyson on June 13th, 2021

INVESTING chat rooms are great gauges of what is hot among todays fickle and fidgety stock traders. The chat room craze du jour is stocks of companies that are currently insolvent.

In recent weeks, investors have thronged into shares of troubled companies like Fruit of the Loom, Levitz Furniture, Loehmanns, Iridium World Communications and the Singer Company. Between Jan. 10 and Jan. 12, for example, Levitz Furniture shares went from 5 cents to 37 cents on no news. And last Wednesday, Loehmanns stock almost tripled for no apparent reason, going from 12 cents a share to 34 cents.

Unable to pay their debts, most of these companies are trying to restructure their borrowings and get back on track through the bankruptcy court process known as Chapter 11.

Inexplicably, the chatterers seem to view these companies depressed shares as bets worth taking. One Fruit of the Loom fan posted this message on a Yahoo board last week: FTLs earnings were upgraded by First Call to less of a loss, this makes me believe that we have nowhere to go but up from here.

But according to investors who specialize in distressed companies, the odds of a common stockholder ending up with anything of value once a reorganization is complete are close to zero. Owning the common stock is absolutely ridiculous for economic reasons, said Martin J. Whitman, chief executive of Third Avenue Trust, a mutual fund concern, and a veteran investor in distressed companies. If I wanted to control the bankruptcy process, I might want to buy up the common. But what does that have to do with the chat room people?

In a typical revamping, stockholders wind up with nothing. Only the creditors -- the banks, bondholders, preferred stockholders and so on -- get anything back.

The Internet chat reveals that some of the investors buying into these companies know little about the reorganization process. A message posted on Yahoos Fruit of the Loom board said: A company has value until they tell the public theres no value. Another stated flatly that a bankruptcy judge could wipe out a companys debt and leave the equity alone, a ruling that would be as likely as a snowball surviving Dantes Inferno.

Shares in Fruit of the Loom, the eighth-largest company to file for bankruptcy last year, were among the most active on the New York Stock Exchange last Thursday. The stock closed Friday at .375, up more than 150 percent since Dec. 30, when the company filed for Chapter 11.

Ridiculous, said Gordon McCormick, managing director at M. J. Whitman Inc. He points out that the prices at which a distressed companys bonds trade reveals what chances a stockholder has of recovering anything in a reorganization. If bonds are in the mid-50s, maybe stockholders get a tip to go along, like 25 cents, he said. When there are bonds under 10, the stock gets zero. Fruit of the Looms most junior bonds recently traded between 7 and 9 cents on the dollar.

Mr. McCormick suspects some investors have migrated from formerly hot Internet shares into distressed stocks. The people that were buying eToys, E-Loan, theglobe.com, they chat with others need a new game, he said. Distressed stocks are very thin, information is scarce and the people that own them have memories of very high prices when the company was healthy. It is the perfect place for cynical manipulators to play.