Podcast: Bankruptcy

In JSE Direct, Latest by Simon Brown

Simon Shares

  • PPC (JSE code: PPC) results. The $150million debt in the DRC is the problem. If they solve that they’ll do a rights issue. If not they’re bankrupt. The president’s speech on Thursday should give them some hope as he likely promises lots of energy and infrastructure spending.
  • Balwin (JSE code: BWN) results. Not bad considering, they paid a dividend and I like them at current prices.
  • Coronation* (JSE code: CML) issued a good trading update. With Purple Group* (JSE code: PPE) they are my two preferred financial stocks for the post-pandemic bounce (actually making money during the pandemic.
  • Keillen Ndlovu on local and offshore listed property.

* I hold ungeared positions.



Bankrupt

  • There are a number of listed stocks in business rescue and I am getting asked all the time about when they start trading again.
    Intu
  • Comair
  • Basil Read
  • Phumelela
  • Others I forget about

Short answer, they won’t start trading again and you’ll get very little or no money back.

First SARS gets paid, then staff and debt holders and if anything is left shareholders will receive a few cents.

Now here’s the thing. The company may survive and start trading again. Certainly, Comair and Phumelela look set to continue operations, but with new shareholders.

This is very much part of the business rescue process, the rescue part is about turning debt in equity and also new capital taking new equity. Existing shareholders get left carrying nothing.

Now, sure this sounds way harsh, but this is how investing works. We buy a business and we get all the rewards, reward that is unlimited in how big is can be. But if things hit the wall, we’re last in line. So our downside is limited at 100% loss, but the upside is unlimited.


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