April 9, 2020 at 6:10 am #109354
As part of my commercial DD I chose an American company, most successful one in the market in terms of generating income through a real estate franchise model.
The latest news show that the company share price is expected to go down to 0 by 20 May 2020 due to the negative effect of Covid 19 on businesses.
When the share price goes down to NIL, the investors loose all value of their investment. The company still operates but how long for and what happens to it, that is a topic I would like to explore. Is there a way to recover fron this?June 24, 2020 at 3:10 pm #111854
Billy Fok Kam LuenParticipant
looking at the company if the share price goes ZERO.
– hope they have reserve fund to run the company and the amount can able to predict how long they can operate
– I think the company drops itself at the listed board, so it can keep the company without selling it to another company.
– or another company will take this opportunity to buy the companyJune 27, 2020 at 12:32 pm #111897
The market reflects the value of the company so if goes to zero it should mean this company would go out of business. Most likely this says that one the company will not breakeven, two the company’s revenue an future revenue cannot surpass the current cost structure and liabilities.
going forward i is important to look at three items:
1. the short term liabilities and the current working capital. This will give an idication of how will the company can opperate with current liabilities like inventory.
2. Long term liabilities can have a devastating impact on companies sin crisis if it expects to default ob some of them. In the real estate industry a lot of projects are leveraged so it can pile up on a company make it hard for it to pay off if revenue is down.
3. Revenue sustainability: what revenue streams are reliable during the crisis and what will pick up. This will be important to show how to reschedule payments on some liabilities.
The company will most likely have to restructure an that is not the end of the world and it can still be a great company.
Wish you the best
JubranJune 29, 2020 at 6:51 pm #111934
I believe is important to assess the business continuity of the target. Does it have the needed funds to go through it?
It is also important to assess the after-crisis scenario: does the company has the ability to thrive once the crisis is over?
If the company has the funds to go through it and limited liability, it should be an interesting target.November 4, 2020 at 12:28 pm #114509
Karl Heinz FoertschParticipant
If the share price goes really down to zero then the company is basically dead.Even if it continues to operate it is not able to generate value for its investors.
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