Insider Equity Holdings is notoriously a stumbling block for people who get in a situation like this. Especially when that large equity holder also happens to be a large creditor. They cannot envision why insiders will always choose to take full advantage of their creditor status ..and abandon their equity stake. They cannot get their mind around why they would do that. For starters there are legal reasons you see this happen but the most important reason is pure economic. Take Eddie as an example. Eddie was the CEO and Chairman of the BOD (he no longer is the ceo but he retains his chairman position on the bod..but thats another story). As a CEO Eddie didn't go out and actually purchase every share he holds. An enormous amount of his equity holdings was "awarded" as part of his "executive compensation" meaning Eddie didnt have actual ca$h coming out of his pocket to attain a large portion of his equity holdings. I'm not saying Eddie didnt "value" his equity..nay nay..he clearly did because it was his majority equity position that gave him the votes to enact what Eddie the CEO decided to do. Voting privileges are a powerful thing.
On the flip side Eddie the "creditor" had to actually lay down hard cash out of his pocket for every nickle he loaned Sears. H As just a shareholder in a bankruptcy Eddie had very little power and odds of any "recovery" were basically impossible... but Eddie the secured Creditor has all the power and options. Bankruptcy laws are made to protect creditors not equity holders.
Think of it this way..If someone gave you a new car and you had a second car that was worth far more that you paid cold hard cash to get which car would you keep if you had to get rid of one?
A look at Form 4's EL has filed over the years would reveal how many of his shares were "awarded" and how many he actually purchased.
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