Are RadioShack Investors Just Refusing to Accept Their Fate?

Jon C. Ogg

It takes a very brave speculator, or a really stupid one, to invest in a delisted stock of a bankrupt company. Investors in the delisted RadioShack stock apparently just refuse to accept the fact that they are betting on a corpse.

If you find the tone of this statement to be a bit cruel or harsh, what would you make of it when the company itself just said the same thing, minus the corpse analogy?

RadioShack issued a press release on Thursday afternoon that warned shareholders, speculators, creditors and anyone else gambling in their remaining equity after it was delisted from the New York Stock Exchange.

The problem is that bankruptcies generally wipe out 100% of the equity. RadioShack shall be no different, if the company knows what is in store for its own future.

Sometimes there is false hope from even the gutsiest investors and speculators — and some people just refuse to accept the fact that even Dracula dies at the end of most vampire movies.

The company said in its formal press release:

In light of the trading volume in its common stock at prices in excess of $0.20 per share, RadioShack Corporation today reiterated its belief that there will be no recovery for any equity holder in its pending Chapter 11 proceedings.

Equity holders of a company in Chapter 11 bankruptcy generally receive value only if all claims of a company’s secured and unsecured creditors are fully satisfied. RadioShack said it believes that the claims of its secured and unsecured creditors will not be fully satisfied, leading to the conclusion that RadioShack common stock has no value.

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