Why do post bankruptcy plays do well ? | stockbee


Why do post bankruptcy plays do well ?

  • 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. 

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