Timeline for What happens if a large shareholder of a company goes bankrupt?
Current License: CC BY-SA 4.0
17 events
| when toggle format | what | by | license | comment | |
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| May 20, 2021 at 10:40 | comment | added | jcaron | @alephzero I would think that the goal of the administrators is to extract as much value as possible out of the assets (to repay creditors), and would thus probably not sell all the shares at once (which would indeed cause a big drop), but rather spread out over time. This does not however preclude other reasons for the share price to go down. | |
| May 19, 2021 at 16:13 | comment | added | alephzero | @StefanFalk There is only one reason why stock prices move. They rise if there are more buyers that sellers, and they fall if there are more sellers than buyers. Everything else is just fairy dust sprinkled by so-called "investment analysts," mostly with the benefit of hindsight. The bottom line is that one organization is being compelled to sell a large number of shares (because of insolvency) but nobody else is compelled to buy them. When the price falls far enough, somebody eventually will buy them, because they think they are getting a bargain at that price. | |
| May 19, 2021 at 14:48 | comment | added | eggyal | @Barmar: yes, definitely similar. I’m not saying that there isn’t something similar to “bankruptcy” for UK companies, just that the terminology is incorrect. Which I only mentioned because when I first scanned this question and commented on gnasher’s answer, I had thought we were talking about an individual shareholder. That comment isn’t entirely correct for company administration, though the broad principles are indeed similar. | |
| May 19, 2021 at 14:46 | comment | added | Barmar | @eggyal Isn't "entering administration" roughly like the US reorganization and/or liquidation? I admit that I only scanned the first paragraph of the wikipedia article? | |
| May 19, 2021 at 14:43 | comment | added | eggyal | @Barmar: insolvency is a general term that describes when an entity (be it a company, individual or indeed anything else) is unable to pay its debts. Consequences of being insolvent in the UK include an individual being made bankrupt, or a company entering administration. | |
| May 19, 2021 at 14:39 | comment | added | Barmar | @eggyal OK, but the UK has corporate bankruptcy, they just (as usual) give it a different name: insolvency. | |
| May 19, 2021 at 14:35 | comment | added | eggyal | @Barmar: that’s US. I had understood we were talking UK. I should have been more explicit in my comment. | |
| May 19, 2021 at 14:34 | comment | added | Barmar | @eggyal Companies file for bankruptcy all the time. Chapter 7 means liquidation, Chapter 11 means reorganization. | |
| May 19, 2021 at 14:02 | comment | added | gidds | “the stock price reflects the last sale” — that depends on the market, the volatility, and on who's reporting the price. A single ‘stock price’ is a convenient fiction. The market may have a last trade price (which may or may not reflect all types of trade); the mid point between the best bid and best offer prices on the order book; ditto the quote book; official open and/or close prices; and/or several other data points. And different pricing providers have different ways of synthesising a single ‘stock price’ from them. | |
| May 19, 2021 at 13:36 | comment | added | chepner | @StefanFalk There are usually people offering to buy stock at a variety of prices; the stock price reflects the last sale, which would take place at the highest outstanding bid. When a large number of shares get sold at once, the lower bidders are able to buy shares before more people can submit higher bids. So a falling price isn't necessarily an indication of panic selling, but rather saturation of existing demand that would have otherwise gone unsatisfied. | |
| May 19, 2021 at 12:42 | comment | added | Philip | @Stefan Selection of primary lender (and even the use of significant debt based funding) is a huge choice and risk for a company to take on so this is intimately tied into the owners/management philosophy and risk appetite. | |
| May 19, 2021 at 10:39 | comment | added | eggyal | @StefanFalk: Companies don’t go bankrupt, individuals do. The closest thing for a company is the appointment of administrators. | |
| May 19, 2021 at 9:49 | comment | added | Stefan Falk | @Philip To be fair, the company that might go bankrupt here is doing to because their primary lender (Greensill) is going bankrupt. So it's primary not their fault. Since there are 35.000 jobs depending on the GFG Alliance it's unlikely (imo) that they won't be saved somehow in the end. But that's another story. | |
| May 19, 2021 at 9:00 | comment | added | Philip | Not quite true, shareholders in this % range usually are pretty intimate with the running of the company, management selection, philosophy etc. Bankruptcy tells you a fair amount of info about the likely health of the company due to this influence. If they can't run their own money well it's unlikely then can influence a company well. | |
| May 19, 2021 at 5:41 | comment | added | Stefan Falk | This makes sense to me. I was just surprised to see that the price dropped even further even though the matter should not affect the company at all - at least not as far as I can tell. Maybe the news just made some investors nervous and they decided (probably understandably) to jump off after the recent decline of the stock over the past few months. | |
| May 19, 2021 at 5:10 | comment | added | Orange Coast- reinstate Monica | news.morningstar.com/classroom2/… "The father of value investing, Benjamin Graham, explained this concept by saying that in the short run, the market is like a voting machine--tallying up which firms are popular and unpopular. But in the long run, the market is like a weighing machine--assessing the substance of a company." An investor dumping shares is a short-run effect. | |
| May 18, 2021 at 21:20 | history | answered | TripeHound | CC BY-SA 4.0 |