- PPC is up 5.5% today . It has recently exited from bankruptcy.
- When companies exit bankruptcy they have clean balance sheet in most cases.
- The reason they exit bankruptcy is they have viable business with potential. If that is not the case then they never emerge out of bankruptcy.
- Companies go in to bankruptcy due to excessive leverage or sometime due to legal liabilities (e.g. many asbestos related lawsuit liabilities resulted in many companies going in to bankruptcy.
- Post bankruptcy many of the companies have better cost structure than their competitors.
- Fund ownership is low past bankruptcy IPO. So fund demand also drives the prices up.
- You need to have a method to track post bankruptcy IPO.
- CIT and LEA are two other recent bankruptcy play.
2/05/2010
Why do post bankruptcy plays do well ?
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