Will Shareholders soar with Jet Airways?
Hi,
This is Vikaas here, Investment Advisor and Founder of www.jaagrav.com. Today I am going to give some perspectives around not investing in Jet Airways.
There was a lot of hue and cry from minority investors loosing 99% of their wealth who have been invested in Jet Airways post the resolution which got passed some time back. The shareholders would get only 1 share for every 100 held in this restructuring process. In other words, 99% shares would be wiped out.
I present Couple of thoughts here:
- While none of the companies which have gone into the insolvency route have had any net worth left, considering all of them were in distress since couple of years, including Jet Airways. Had written about it on my website: Train to notice what one sees – Jet Airways Fiasco!!I
- I have often wondered, How come these companies, including Jet Airways get traded or rather allowed to get traded? Some of them continue to move up and start trading at absurd valuations, in the hope that some white knight would come to save the sinking ship.
- If the secured lenders, i.e. banks are taking haircut (90%+ in quite a few cases!!), equity investors never stood a chance to begin with, in the order of payment – So why cry over something which you knew from within that its in a dilapidated shape and the investment (oops trading!!) was anyways was built on a weak, rather NO edifice?
- To avoid causing misery to the market participants (would want to avoid using Investors or traders!!), regulators should halt trading in the stocks which are under insolvency by giving some kind of notice period, etc. I am not an expert in this area though!!
- Greed of making quick buck doesn’t go away!! The market participants dance till mid-night only to realize much later that they have been swimming naked (me included in one such instance!!)
Last but not the least, its best to AVOID!! Easier said than done, when your friend who doesn’t have any Investing knowledge (assuming) calls to brag about the extra-ordinary returns which he has generated!!
With the existing market cap of the company now at ~USD 160 mln as of September, 2021 with no intrinsic value; an existing shareholder of Jet Airways can only resort to praying, considering that the company’s value needs to SOAR to 10,000% to ensure that he is able to get his principal back!!
While Thich Nhat Hanh stresses upon the importance of hope; he says:
“Hope is important because it can make the present moment less difficult to bear. If we believe that tomorrow will be better, we can bear a hardship today.”
However, investing mathematics is a little different:
A 20% loss only requires 25% gain to get back to even. A 50% loss requires a 100% gain and a 90% loss requires an astounding 900% gain – just to get back to even. So, holding a crap for LONG RUN is not wise!!
Please note that these are my personal views. Request you to conduct your own independent research or consult your financial advisor before investing.
Hope you enjoyed listening to this!!
For more interesting topics, you may check out my website, www.jaagrav.com. If you want to reach out to me, you may email me at vikas@jaagrav.com
Thanks!