Nortel Files For Bankruptcy Protection

Jan 14th, 2009 – Comment

The creditors will now set about trying to recover their assets while the shareholders will take the whip. In my experience the only winners in a bankruptcy are the lawyers and accountants that manage the process.


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Lou Schizas is an equities analyst, investor, entrepreneur, professor and television and radio personality – and a true believer in the happiness-inspiring powers of capitalism.


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Lou,

Given Nortel’s announcement today I am curious who is buying? Almost 64 million shares traded, I can not imagine who would buy on news like this ?

Deryck

Wealth Destruction

Wealth Destruction

Hi Deryck,

The Nortel saga has finally reached its logical conclusion. There has been very little reason to buy this stock for a very long time. The creditors will now set about trying to recover their assets while the shareholders will take the whip. In my experience the only winners in a bankruptcy are the lawyers and accountants that manage the process.

The most likely buyers in this case would have been short sellers buying at lower prices to cover their positions.

The best lesson from the Nortel situation is that in many cases the first hit to your capital is the best hit. There is no reason to hang on to a stock all the way to zero.

Happy Capitalism!

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