Replies to post #882 on Goodrich Petroleum Corp. (fka GDPMQ)

[1manband]

Of course "holders of Company preferred and common stock will receive no recovery on account of their equity interests." That's what bankruptcy means....

No, it doesn't. Not automatically or in all cases, anyway. Chapter 11 bankruptcy is reorganization that permits the Company to negotiate with its debtors and creditors in an attempt to remain in business. Usually they are successful in doing so, but always at the expense of the equity holders (preferred and common shareholders) who only get what is left after the debtors and creditors are satisfied. Most of the time that means common shareholders are wiped out, but even in the few cases they are not, they take a massive haircut. If common shareholders come out with just 5 cents on the dollar, they are lucky.

Chapter 7 bankruptcy is liquidation. In those cases the company does not go on and no one gets any new equity. Again, common shareholders are dead last in line and only get what is left after debtors, creditors, and then preferred shareholders are paid in full. 99% of the time that means common shareholders get nothing.

The Federal bankruptcy process is the same for all companies, regardless of size. The laws and the courts make sure of that. But what is different for every company is the details. Stakeholders, which for most individual investors would almost always be as common shareholders but sometimes as preferred shareholders or bond holders, need to stay informed to protect their money. They need to read the SEC and/or bankruptcy court filings. And whenever they see in those official legal filings that the common shares are going to be wiped out, they need to not only believe it, but do something about it.

Otherwise they are just going to have very expensive wallpaper.

And those investors who don't read the filings are doomed to fail.