Responding to angry former shareholders, Kmart Holding Corp. has posted an information page on its website explaining why people who held stock in the old Kmart had their shares wiped out last Tuesday when the company emerged from bankruptcy protection.
The basic answer is that once Kmart paid off its creditors, there wasn't any money left to pay off shareholders. And then, conveniently enough, when the company got out of bankruptcy it became a new company with all new shareholders -- and the old shareholders were out of luck.
It isn’t like this is a unique situation to Kmart; according to various reports, it is a procedure common to companies that go through bankruptcy.
You can find the Q&A on Kmart's website at:
http://www.kmartcorp.com/corp/investor/general/faq.stm
The basic answer is that once Kmart paid off its creditors, there wasn't any money left to pay off shareholders. And then, conveniently enough, when the company got out of bankruptcy it became a new company with all new shareholders -- and the old shareholders were out of luck.
It isn’t like this is a unique situation to Kmart; according to various reports, it is a procedure common to companies that go through bankruptcy.
You can find the Q&A on Kmart's website at:
http://www.kmartcorp.com/corp/investor/general/faq.stm
- KC's View:
-
It might be easier for the former shareholders to accept the fact that they got the short end of the stick if the company had been the victim of outside forces that couldn't be dealt with, as opposed to the apparent plaything of some senior executives who saw the company as their own personal cash cow.
There may not be any money, but they certainly can look on with a certain amount of pleasure as these former executives get their comeuppance in the courts. We wouldn't be surprised if some civil suits get filed against these guys to try and recover investments made in Kmart, investments that were lost to corporate jets, retention bonuses, forgiven real estate loans, and assorted other golden eggs that these executives laid for themselves.
