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 recently. The shareholders would get only 1 share for every 100 held in this restructuring process. In other words, 99% shares would be wiped out.
Couple of thoughts:
- While none of the companies which have gone into the insolvency route have had any networth left, considering all of them were in distress since couple of years, including Jet Airways. Had written about it Train to notice what one sees – Jet Airways Fiasco!!I
- 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 of some white knight which would come to save the sinking ship.
- If the secured lenders, i.e. banks are taking haircut (90%+ in 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
weakNO 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!!)
- Hence, 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 market cap of the company now at ~USD 184 mln (~INR 1,365 crs) as of July 2, 2021; 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!!
“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.” – Thich Nhat Hanh
Disclaimer: Please note that these are my personal views. While I am NOT a registered Research Analyst as per SEBI (Research Analyst) Regulations, 2014, all investors are advised to conduct their own independent research into individual stocks or industries before making any decision. In addition, investors are advised that past stock performance is not indicative of future price action.