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Tailored Brands (TLRD before, TLRDQ after the bankruptcy), owner of Men's Wearhouse and Jos A. Bank, filed for Chapter 11 back in August. It's about to emerge from bankruptcy later this month (end of November). According to this news article, common shareholders are about to get wiped out. In particular, I quote:

Under the plan, Tailored Brands would shed $686 million in debt and turn ownership over to lenders and other creditors, after decades of being a publicly traded company.

Clear enough for me. Yet, yesterday the stock went from $0.08 a pop to $0.15 with 5 million trading volume. That's roughly $500.000 cash exchanging hands.

Now why on Earth would that happen? I'm puzzled. The stock is as good as worthless, its price should be $0.0, trading volume exactly zero. Or is there some hidden tax benefit in trading worthless penny stock? Or some other angle? Could someone provide some illumination?

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  • Maybe someone's trying a pump-and-dump scheme? – RonJohn Nov 18 '20 at 11:32
  • Ron .. perhaps "succeeding" it sounds like! Heh! – Fattie Nov 18 '20 at 13:48
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Now why on Earth would that happen? I'm puzzled. The stock is as good as worthless, its price should be $0.0, trading volume exactly zero. Or is there some hidden tax benefit in trading worthless penny stock? Or some other angle? Could someone provide some illumination?

People can be easily confused. They think that when the company emerges from bankruptcy then they might become a profitable company, and at only a few pennies a share there is money to be made. They are of course wrong, because those shares won't survive the bankruptcy process.

The sellers are more then happy to take some money, any money. They either lost a lot already, or they bought it recently and realized their mistake.

Despite the plan:

It's about to emerge from bankruptcy later this month (end of November).

There is some risk that plan could fall apart, and either never happen or it take longer. If they can sell now, they don't have to worry about waiting until it is 100% officially worthless before declaring the loss. They don't have a risk of it dragging into next year.

The other option is that this is a pump and dump situation, and somebody is making money on the suckers....

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  • Today the stock again doubled its price to $0.30. While the company's website states: "Our restructuring support agreement (RSA) currently provides for 100% of the equity in the business to go to our term loan lenders. Accordingly, we expect any existing equity will be cancelled if our Plan of Reorganization is implemented, following the creditor vote and approval by the Bankruptcy Court." – Lajos Nagy Nov 19 '20 at 3:20

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