Ouch. Today's BK announcement does sting, especially since you all warned me about getting into FRNT. I never thought it would happen, much less so quickly. Thanks for trying to steer me away. I guess I should be glad I didn't buy any more of it than I did.
Ouch is right. I have been wanting to buy back in and couldn't find a reason. I saw the bankruptcy price at $.42 cents and bought 10,000 shares this morning. Not a lot of money, but a price that I couldn't resist. As long as they don't go #7 I should be alive long enough for a thrill ride. Hope I didn't just cast $4200 to the wind.Dale
Dale, your post sounds like (yet another) learning opportunity for me. I was under the impression that common shareholders are almost certainly going to lose everything due to the BK -- FRNT's website even has a link to FAQs explaining that the company's priority now shifts from maximizing shareholder value to paying off creditors, and that shareholders shouldn't expect their holdings to retain any value at all. To me, that sounds like the thing is going to zero. So I was puzzled when I saw the price hovering around 48 cents most of the afternoon. Now your post says that since it's Chapter 11 and not Chapter 7, bagholders might actually get something after all. Does that really ever happen?
There was a term I heard once called a dead cat bounce. (even a cat bounces when it hits the pavement) I may be buying in on that. Frontier stockholders may be dead but a lot of things can happen. The bankruptcy judge can allow a new stock sale or bond financing, wipe out debtors, including stock holders. Change union contracts, change airport gate contracts. Frontier definitly gets time and their money from their credit card processor. Frontier can sell the company, sell assets, renogiate all their deals. It appears everyone sold their shares today with 35 million shares changing hands. (normal is 270,000 shares) Someone else is buying all those shares. I now own 10,000 shares of paper that a judge can call worthless. My .42 cent buy was worth $.60 later in the day! Lets see what happens in the upcoming weeks. Your reference to the Frontier notice to shareholders is linked at: http://www.frontierairlines.com/restructure/I pity the people that bought shares at $10 or $6 and held them. I'll take my chances. We still own the company. The creditors get first dibs on our assets if Frontier can't find an acceptable business plan. I have to believe Frontier is not done fighting. They could have just quit.Dale
I'd definately get out and stay away. I learned my lesson on bankruptcy by getting into Kitty Hawk (cargo carrier based in Dallas) at a real cheap price after they announced bankruptcy. They exited backruptcy, but I lost all my shares because of the bankruptcy deal. The stockholders lost all their shares because the creditors that accepted the Chapter 11 re-financing got all the new shares that were issued.Joel Greenblatt in his book "You Can Be A Stock Market Genius", stated that it is "rarely a good idea to purchase shares of common stock that has recently filed for bankruptcy" - pg 166 and that it "is rarely a profitable investment strategy" - pg 167. His suggestion is IF you want to invest in a bankrupt carrier, invest in the bonds, debt, etc of the company. That being said, that should be left to the ones that specialize that in area.If you believe a bankrupt carrier IS a good long-term investment, wait till it comes out of bankruptcy, look at the stock value versus what you think the stock is worty and invest as you would in any other stock.Bottom line, keep your money (or sell, Dale!) and invest your money in a good, solid stock.
Thanks Nuke,I lost my nerve and sold at $.76 on Monday. A good 81% profit. Now it is sit back and watch time. Dale
Congrats on getting the bounce - and selling at a good profit! Don't think there'll be another bounce in this one. Not sure who's buying and selling out there. Haven't heard anything about them getting financing, which probably doesn't bode well for the long term.
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