Homepage
PR Newswire
03-04-2015, 08:18 PM
(This post was last modified: 23-08-2016, 12:15 AM by Debronic.
Edit Reason: editorial
)
Thank you CityFarmer for doing the hard work! I actually recall from my memory quite a few of these cases but did not have the time to go dig them up. Hehe...
Hi ghchua, yes, liquidation is one possible way for investors to salvage something but like you rightly pointed out, ultimately the controlling shareholders call the shots. Furthermore, some companies cannot be liquidated easily unless it is at fire sale prices e.g. those with lots of illiquid fixed assets. So if there is a possibility that the company can survive, the major shareholder might just let it continue as a private entity. Even if he does not think it can survive, he might use this as an excuse not to liquidate now so that he can do it later under much more favorable conditions.
It is an imperfect system for sure. As equities investors, we just need to be cognisant of the risks that comes with investing in these companies.
Hi ghchua, yes, liquidation is one possible way for investors to salvage something but like you rightly pointed out, ultimately the controlling shareholders call the shots. Furthermore, some companies cannot be liquidated easily unless it is at fire sale prices e.g. those with lots of illiquid fixed assets. So if there is a possibility that the company can survive, the major shareholder might just let it continue as a private entity. Even if he does not think it can survive, he might use this as an excuse not to liquidate now so that he can do it later under much more favorable conditions.
It is an imperfect system for sure. As equities investors, we just need to be cognisant of the risks that comes with investing in these companies.