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Wouldn't it be a wonderful world, where the odds were stacked in favour of shareholders over bondholders and lendors? A utopia where share prices go up forever and PI's make lots of money.
The only snag:
Bondholders and lenders would have no incentive to lend, so companies would have no money to grow.
Buying a share gives you voting rights, it does not give you 'ownership'. And neither does your money get injected into the business, how could it?
Sorry, but you need the bondholders and lenders to make this capitalist free market work, much more than they need you.
My thoughts exactly. Brilliant PR for spd. Go on Mike.
" As such I fully support MA in his enthusiasm to leave no stone unturned"
Is that after they have unturned all the stones at Carillion...where the BOD were also in denial of what the real situation was ....
A lot of talk happens but very little action......Carillion was paying a dividend in the Spring and delisted before the end of the year ...
Incompetance isnt a criminal offence
I believe the BOD decided to save their 5 jobs at the expense of the shareholders. I believe many of the LTH were also employees and loyal customers with shareholder discount cards. In this scenario the BOD saving themselves at the expense of everything else leaves Debs with very little remaining customer loyalty and little chance of surviving. The bond holders will suffer in due course also, and like the LTH will probably wish they had accepted M A's offer. However bondholders are not playing with their own money so won't really hurt them. If Ma manages to get this cheap in the short term and reinstates the shareholders even to 3pps he would gain and create a lot of loyalty and respect/support.
"also without equity .. would there be debt?"
Yes, there was debt market before the invention on the limited liability company.
In fact the debt market is bigger.
Yeah I know but I'm sure he is still looking to get a consortium together to challenge the takeover. All news is goid
Perhaps look at CLP then - some bondholders have been prepared to exchange their debt for equity at a five fold premium to the share price at a fixed date - so sometimes bondholders do consider a haircut... also without equity .. would there be debt? (and visa versa). I understand your point and you made money here on your short but if the odds were against shorting (in a different reality) any share perhaps you might think a little differently and have some sympathy for shareholders here - ok there were plenty of warnings but most did not expect delisting to happen so soon did they? I personally thought administration would happen towards the end of the year if no improvement in trade - for whatever reason - it couldn't wait....
The courts can't just force bondholder to take a write-down like that, that would completely undermine every single aspect of company and contract law that we have in existence. You must be joking right? It'd be like you not being able to pay your mortgage and your bank being forced by courts to write-down their loan instead of foreclosing on the house. Sorry, you lost the house, as per the agreement you signed.
As I say, I think the offer should have been accepted and hopefully the courts will agree. As such I fully support MA in his enthusiasm to leave no stone unturned
SilverSpoons – why should bondholders take even £1 of haircut when existing shareholders keep some of the value? You do understand that equity ranks behind debt right? That in an insolvency, debtholders have to be paid in full before equity holders get anything? Some of the lenders were still the original par debt investors.
I understand that it's a commercial deal, and that all points are negotiable, but that is entirely within the bondholders' and RCF lenders' control. If they want the waterfall to be respected, they are completely within their rights to do so, and you can do nothing about it. You can cry all you want about "shareholder protections" but it's the same as every other jurisdiction in the world. Debt ranks ahead of equity.
2. This sets an awfully example of lack of shareholder protection and should be used as a test case to illustrate to investors both here and abroad that buying shares in UK companies comes with certain rights and protections and should not be viewed as cannon fodder for bondholders to sacrifice at the first opportunity.
But, the equity to debt ratio in this was tiny, £200m just wan't enough. Borrowing money come with responsibilties. Unless you are also suggetsing that equity is no longer the "risk" money? Do you also think equity holders should also been given less upside if it all works out? I bet not.
Correction: Tuesday's offer of 200million
Yeah of SPD shares, not DEB lol
Does anyone use Equiniti share dealers? I wrote on here the other day that following my online sale in debenhams a day before administration of which I received a contact note and uncleared funds, Equiniti have told me that the funds have not been released by the market. A couple of users on here seem to think I have to be patient which of course I will be, but there is a worry I might not receive my funds. Would this be the crest settlement system checking for any possible violations or the administrators appointed to Debenhams? At the end of the day, the contract note I have received from equiniti is legally binding isn't it? Just wondering if anyone is experiencing problems with any share sales the day before the company suspended its shares? the T trade was " days which took us to Wednesday when of course the companies shares were suspended. Thanks in advance
...court and why he should win. In my opinion:
1. Friday's 200mil offer was completely reasonable for all parties, yet was rejected by the BoD, showing not only a disregard for shareholders but an outright opposition towards them. If MA was insuring the RI 100 percent then of course he was reasonable in requesting he be made CEO, and the given the discount the bonds were trading at the haircut was more than reasonable.
2. This sets an awfully example of lack of shareholder protection and should be used as a test case to illustrate to investors both here and abroad that buying shares in UK companies comes with certain rights and protections and should not be viewed as cannon fodder for bondholders to sacrifice at the first opportunity.
"making a share trade - at least over x value."
I cant see how that would ever be practical. What value could it be? how quick would the advisor respond?
I suspect we'd also see spreads increase on transactions below that "x value".
Lets face it, financial eduction is the best hope.
There will always be people who get spat out in this game, but for the sensible conservative invetsor willing to accept 7% per anum return (plus some side bets) why should we kill the asset class off for them by applying a ton of extra regulation?
I often have to fill in those "sophisticated investor" things out, maybe for there should always be a reminder when you login to you brokers "are you diversified enough".... :)
Well that would reduce the revenue of Hargreaves Lansdown and the like by 50% (just a guess) considering all the self invested SIPPs they administer - perhaps like when you need an IFA before transferring a pension - you should speak to an IFA or similar before making a share trade - at least over x value.
I see your point, but the logical conclusion to the system you propose, ie. Investors making sound decisions based on sensible judgement and weighing up the risks, would mean more regulation, pre qualification to invest and less opportunity for Man on the Street to participate.
Which judging from some of the misunderstanding that I have seen here recently, probably wouldn't be a bad thing.
"As a general principle, it's far safer to buy the distressed debt of a struggling retailer, rather than its equity."
That's what i did here and I'm looking over Saga this morning. Long on debt, short on equity looked a perfect place to be on Debenhams.
I agree with the bubble but funding would be at higher rates creating less shares for the same money slowing the dilution . Meaning business has a better chance to grow and expand . People should buy shares as a investment not as a gamble trying to guess the best time to sell . Then try to de ramp the SP backdown to buy back cheaper , howis that helping a business grow .
"Our markets are notfor investing they are for trading ."
Agree thoroughly, especially PI's. Those who go long usually have one motivation- to sell at a profit. They have no interest in the strength of the company they don't participate in votes.
Therefore:
"If shares had one direction the market would make next to nothing on buy and sells as we would hold long term"
If all shares only went in one direction despite the poor health and a performance of a company, the only thing that would be created is bubbles. Like bitcoin.
Fact we had the RNS confirming this was being shorted .Fact Shorters sell shares to lower the SP , to buy back cheaper . In your trading life have you ever seen a short actualy get burnt ? If you have it is so rare . There were multiple BOD changes were they all the worlds worst ? . Shorting is designed to dilute and lower the SP to create movement . If shares had one direction the market would make next to nothing on buy and sells as we would hold long term . Invest ..lol . Our markets are notfor investing they are for trading .
There are so many reasons why this is waaaaaaay off the mark. Maybe when I get to my desk I’ll type them out, but I want you to think really hard as to whether you think shorting actually caused DEBs to go into Admin. I mean really think about it.
“Of course the Longs can buy the SP to counter the shorters...cant they? ..why dont they?”
You compare two different things in order to make shorting look legit. The truth is, shorting should be illegal if regulators would have an ounce of morality.
You see, when going long, you buy shares from a willing seller.
When going short, you sell shares from a custodian that lends you somebody else’s shares without his consent. The custodian acts against the interest of his client who owns the share, because the interest of s share owner is for the share price to be high, not to be low. Share owners do not want their shares to be given to shorters so they can sell them and put downward pressure on the SP. But the custodians who act as market makers are happy to allow shorting to earn additional commissions from trading, despite this being against the interest of the share owners who have their shares in custody with them.
The custodian acts against the interest of share owners when allowing short selling, which is a breach of their fiduciary duty, but regulators allow this because they are corrupt, incompetent and malevolent.
If short selling was not allowed, it would be difficult to crush a share price to zero when many shareholders just hold and refuse to sell. Once the weak hands fold and sell their shares, there would be no more shares for sale and the price could only go up. By protecting the SP from devastating crushes, a company in distress can issue additional shares to refinance at a better rate since the shares hold value, and this way shareholder equity is protected. If DEB shares would have lost only part of their value, from 100p to 30p, the company could have issued additional shares at a discounted price of 25p and raise a lot of capital without wiping shareholders.
But the rules are made against shareholders, because shareholders are regular people. They are made to favor crooks like CEOs, BOD and tier 1 creditors.