Emerging Kodak

[alanrockwood]

By the way, the good news for the owners of the corporation (the shareholders) is that they are not personally responsible for the money the company owes. Thus, they may lose every penny the spent buying shares, but at least they don't have to pay the company's debts by dipping into their own pocket. That's part of the basic deal a shareholder signs up for.

 

[railwayman3]

I see you are from Germany. Perhaps bankruptcy laws are different there. Under US bankruptcy law the shareholder is last in line to get anything in a bankruptcy. It is virtually unheard of for shareholders to receive anything in a bankruptcy. Exceptions to this generalization are EXTREMELY rare and even those few rare exceptions virtually always involve special circumstances, such as the Texaco bankruptcy. I believe the shareholders survived that one.

The priority for payout in a bankruptcy runs roughly like this. The government gets paid first (taxes). Then wages to workers get paid, including any back wages owed. Then various forms of secured debt, i.e. debt backed by collateral, then unsecured debt. At the very tail end of the priority list come the shareholders. If the creditors don't get paid what they are owed then the shareholders lose ownership of the company. Their shares are cancelled and become worthless. If the company emerges as an operating company it does so under new ownership, usually being owned by the former creditors as partial compensation for not having been paid all the money they were owed.

Almost exactly the same procedure and priorities apply in the U.K.

 

[railwayman3]

In case Kodak resurrects from bancruptsy as the same legal entity, the old shareholders are still in hold of their part/share of Kodak.
This of course does not say anything of a future stock price nor of a future dividend from Kodak.




Shareholders are debtors, how could they get their money back anyway?




Or do I miss something?

The bankruptcy may involve some form of restructuring or issue of new classes of shares, so the old shareholders may or may not still have a holding in the company.

Technically, shareholders are the last-in-line of the creditors, not debtors. (Debtors are those who owe money to the company. In Victorian times, debtors who didn't pay what they owed to others could be put in "Debtors Prisons"...that's how we were taught to remember the difference when I was a student! )

 

[AgX]

Interesting. In Germany the shareholders are regarded in case of insolvency as debtors, as part of the owners.
However they are spared from paying to the creditors. The shareholder only stands for what he brought into the company.

 

[Roger Cole]

I've held stock in a company that went bankrupt. Well, actually I saw it coming and sold for pennies on the dollar and got a few hundred for my roughly bought-for-$3k of stock. Those who held out all the way, if anyone was foolish enough to do so, lost it all. (Don't ask, it's too embarrassing - chalk it up a techie betting on a tech recovery based on knowledge of the product, not economics at the time.)

The only reason to buy stock in a company that's in bankruptcy would be for a quick flip since the penny stock prices can fluctuate rapidly and even a small amount of change is a large percentage at such prices. So if you feel lucky and want to gamble, the odds (if you watch a bit and have an idea) are probably no worse than Vegas, or not much worse anyway.

 

[MattKing]

The priority for payout in a bankruptcy runs roughly like this. The government gets paid first (taxes). Then wages to workers get paid, including any back wages owed. Then various forms of secured debt, i.e. debt backed by collateral, then unsecured debt. At the very tail end of the priority list come the shareholders. If the creditors don't get paid what they are owed then the shareholders lose ownership of the company. Their shares are cancelled and become worthless. If the company emerges as an operating company it does so under new ownership, usually being owned by the former creditors as partial compensation for not having been paid all the money they were owed.

You missed the fees for the trustee in bankruptcy - they usually are near the top of the list.

And at the risk of being too technical, in some cases shareholders hold "preferred" shares, which are actually more like debt instruments, and are therefore given a portion of what is available to unsecured creditors (if anything).

It is true that control is essentially in the hands of the bankruptcy court. If, however, the right person or entity (think deep pockets and a history of business success) took over a controlling shareholding, it might very well affect how the bankruptcy proceeds.

 

[ambaker]

At this point to buy the company, and take control, you would have to get the court's approval to do so. The current stockholders no longer have any control.

What I really love about the whole deal is that the same people who could not manage to succeed with the company when they were profitable, will now try to succeed with much fewer resources.


Sent from my iPad using Tapatalk HD

 

[RattyMouse]

What I really love about the whole deal is that the same people who could not manage to succeed with the company when they were profitable, will now try to succeed with much fewer resources.

You doubt the ability of Perez to turn around Kodak??? :eek:

 

[Roger Cole]

I doubt the ability of Perez to turn around a go kart inside a football field.

 

[MattKing]

I put a lot more blame on the various institutional/big fund investors and the board members that they put on the board, with instructions to turn around the short-term profit outlook.

 

[Prof_Pixel]

I doubt the ability of Perez to turn around a go kart inside a football field.

As I said in a posting back in August 2012:

I agree that the management is more concerned with their pockets than saving the company. They are making one monumental blunder after another.

I saw the problems starting in the later '60s with the rise in MBAs with no product experience in management positions. As I've said many times, "Two things have led to the downfall of US Corporations: the MBA and the spreadsheet." With the computer spreadsheet, the MBAs were able to 'fiddle' with the figures and go for short term gains at the expense of long term gains.

Car Guys vs. Bean Counters: The Battle for the Soul of American Business by Bob Lutz talks about the issue in the auto business, and I certainly saw it at Kodak.

 

[Ken Nadvornick]

What I really love about the whole deal is that the same people who could not manage to succeed with the company when they were profitable, will now try to succeed with much fewer resources.

You doubt the ability of Perez to turn around Kodak??? :eek:

At this point no one in their right mind would take the job.

Ken

 

[Ian Grant]

As I said in a posting back in August 2012:

I agree that the management is more concerned with their pockets than saving the company. They are making one monumental blunder after another.

I saw the problems starting in the later '60s with the rise in MBAs with no product experience in management positions. As I've said many times, "Two things have led to the downfall of US Corporations: the MBA and the spreadsheet." With the computer spreadsheet, the MBAs were able to 'fiddle' with the figures and go for short term gains at the expense of long term gains.

Car Guys vs. Bean Counters: The Battle for the Soul of American Business by Bob Lutz talks about the issue in the auto business, and I certainly saw it at Kodak.

You've hit the nail on the head. It's something my father felt was going wrong in the late 1960's and in fact he was appointed Managing Director of a large UK company to help prevent the short-termism that the accountants were advocating, he was an engineer and production director previosly.

It's not just a US problem it's been just as bad in the UK.

Ian

 

[DREW WILEY]

We've sucessfully hired a few MBA's in our company. They get to sweep floors a few years, then might
be taught to stock shelves. If it appears they can work, they might eventually be assigned paperwork
tasks and gradually acquire a little actual responsibility. Any corporation stupid enough to drop them
into anything resembling a top tier is doomed.

 

[pentaxuser]

It's not just a US problem it's been just as bad in the UK.

Ian

True except for the Financial services industry - our saviour. Thank goodness for small mercies

pentaxuser

 

[Roger Cole]

We've sucessfully hired a few MBA's in our company. They get to sweep floors a few years, then might
be taught to stock shelves. If it appears they can work, they might eventually be assigned paperwork
tasks and gradually acquire a little actual responsibility. Any corporation stupid enough to drop them
into anything resembling a top tier is doomed.

Every public company in the US would seem to be doomed then.

 

[Prof_Pixel]

Every public company in the US would seem to be doomed then.

... pretty much ...

 

[DREW WILEY]

Roger - corps are dropping like flies, and generally due to sheer stupidity ... lemming mentality. If one
corporation shoots themself in the foot, their competitiors will do exactly the same. Whenever possible,
I try to deal with privately-held manufacturers which are at least somewhat buffered from the worst of
this, though there is usually some smart-alec MBA who manages to make a mess before eventually
getting fired. It's a parasitic profession, kinda like going to a surgeon who had never even taken a
biology class or dissected a frog first. Part of my job is predicting what direction mfgs will head into.
If a bunch of twenty-something MBA's get dropped into the hierarchy, it's time to run away from that
outfit - fast. Or if you work for someone like that, look for another job fast. Usually the only person
more incompetent is the CEO who hired them.

 

[Noble]

Most good MBA programs require substantial experience to get in. So if people are hiring MBAs with no experience maybe they should start hiring from better schools. MBAs in the US are like law degrees. Universities open new law school and business departments all the time because they are cash cows. The humanities department doesn't pay the seven figure salary of the basketball coach. So as with most things in life as a student and as a hirer you have to use your sense of discretion... and common sense. That's the whole point of targeting your recruiting efforts and actually interviewing the candidates.

 

[Prof_Pixel]

Most good MBA programs require substantial experience to get in.

I just checked on the admission requirements for the Harvard MBA program and don't see any "substantial experience" requirement. See: http://www.hbs.edu/mba/admissions/admission-requirements/Pages/default.aspx

 

[Ken Nadvornick]

My confusion arises from the basic question: Where's the The Buck Stops Here paperweight?

Inexperienced MBAs can and often do point in silly long-term directions. But doesn't the boss' desk still have that paperweight sitting on it? And the veto power that goes along with it?

So what gives?

Are these guys all asleep at the switch? And if so, where then is the institutional dead-man switch? The one designed to keep the train from jumping its tracks and causing horrendous train wrecks (re: Kodak)? I thought that was supposed to be the members of the BODs? Or did somebody weld that switch shut too?

Ken

 

[Prof_Pixel]

My confusion arises from the basic question: Where's the The Buck Stops Here paperweight?

Inexperienced MBAs can and often do point in silly long-term directions. But doesn't the boss' desk still have that paperweight sitting on it? And the veto power that goes along with it?

The 'Boss' is also compensated on the short term performance of a company. Everybody wants it now.

 

[Ian Grant]

The 'Boss' is also compensated on the short term performance of a company. Everybody wants it now.

Best of all is the Bonuses paid for the losses !!!

Ian

 

[alanrockwood]

Best of all is the Bonuses paid for the losses !!!

Ian

I once worked for a company that was losing money. A new board of directors and CEO appeared by some mysterious process that no one understood. One of the first things they did was to give themselves a deferred compensation package, payable within three years, with a minimum cash payout worth more than the entire net assets of the company, and this was only the tip of the iceberg with regard to the shady dealings.

Authorities from several levels of government were alerted, but they did not lift a finger. A few years later the company was de-listed from the stock exchange for not having an elected board of directors, but it was too little and too late, well after many shareholders lost virtually all of their money invested in the company.

 

[wblynch]

Roger - corps are dropping like flies, and generally due to sheer stupidity ... lemming mentality. If one corporation shoots themself in the foot, their competitiors will do exactly the same.

Whenever possible, I try to deal with privately-held manufacturers which are at least somewhat buffered from the worst of this, though there is usually some smart-alec MBA who manages to make a mess before eventually
getting fired.

It's a parasitic profession, kinda like going to a surgeon who had never even taken a biology class or dissected a frog first. Part of my job is predicting what direction mfgs will head into.

If a bunch of twenty-something MBA's get dropped into the hierarchy, it's time to run away from that outfit - fast. Or if you work for someone like that, look for another job fast. Usually the only person more incompetent is the CEO who hired them.

It's called Equity Extraction and it is by design.

Basically a Vampire operation to suck decades or centuries of 'value' out of assets (plants, real estate) that was bought and paid for long ago. Suck out the blood and toss the carcass aside.

Taught by all the 'best' business schools. A direct result of the preponderance of MBA's since the 1970s.

Oh, and I might add, the BOD and CEO are in on it.