Let’s get some of your misleading terminology out of the way. It is often misquoted that when a loan is collateralized that the assets are sold. This true in a sense except the tax is forgiven on the sale until the loan/ debt is paid back to the creditor. In other words the tax’s on the sale is not payable until until the assets are sold outside the corporation. If the assets are sold within the corporation and the collateral is held in trust by the corporation for the creditor then the sales tax will also be held pending payment. If the collateral is returned on payment of the debt then the tax owed on the sale will be eliminated or forgiven.
I talked yesterday a little about payables that again is a loan that carries a tax burden with it. This is no different then the borrowing of capital to pay wages, a lunch barbecue ect. The debt borrowed is taxable as soon as the funds leave from under the corporate umbrella.
I once had a young student come up to me and say what happens then when the corporate lunch bought on using credit ends up in the city dumbster.
I told him that 18% of the cost of the lunch will be forgiven as an expense. The other 82% of the cost of the lunch is taxable but it is not payable until the business is sold to a outside interest.
So a buyer comes along and offers $100 for the business to its common shareholders. The debt is twenty five dollars noted by the shareholders deficit. The tax bill owning is $200 dollars ie: treasury stock.
So let me ask everyone here how much return in capital will the common share holders receive. Remember the common share holders are not liable for any debt that can’t be paid.
Asset including recievables + shareholder deficit = $100 Debt = share holders deficit including payables =$50 Tax debt =$200
The public owning the tax debt that was bought will get $50. The common share holders will get nothing.
We know BioAmber stock has not been pulled or replaced from the market and is still selling.
That is because neither the SEC nor FINRA have the legal or regulatory power to stop it from trading until the conclusion of the bankruptcy. BIOAQ shares will continue to trade until the liquidation is complete.
I am sure everyone who has invested in this stock has already read the SEC Bulletin about bankrupt stocks, but here it is again:
"A company's securities may continue to trade even after the company has filed for bankruptcy under Chapter 11. In most instances, companies that file under Chapter 11 of the Bankruptcy Code are generally unable to meet the listing standards to continue to trade on Nasdaq or the New York Stock Exchange. However, even when a company is delisted from one of these major stock exchanges, their shares may continue to trade on either the OTCBB or the Pink Sheets. There is no federal law that prohibits trading of securities of companies in bankruptcy."
And don't forget:
"Note: Investors should be cautious when buying common stock of companies in Chapter 11 bankruptcy. It is extremely risky and is likely to lead to financial loss. Although a company may emerge from bankruptcy as a viable entity, generally, the creditors and the bondholders become the new owners of the shares. In most instances, the company's plan of reorganization will cancel the existing equity shares. This happens in bankruptcy cases because secured and unsecured creditors are paid from the company's assets before common stockholders. And in situations where shareholders do participate in the plan, their shares are usually subject to substantial dilution."
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