Playing Investors for Fools
There really is a sucker born every minute…
At least there is on Wall Street, where investors flock to the stocks of companies that were on the verge of going belly up if they hadn’t maneuvered a last-minute, highly complex debt-restructuring deal.
The hallmark of this specific type of deal is that some insider needs to be immediately bailed out by the stock, which even before any deal has been announced has been rising on on some kind of vague rumors… or no rumors at all.
But for this kind of deal to really work, the stock has to spike on the news, almost as if the company has received pennies from heaven… even if it really might be (for the average stockholder, at least) a deal with the devil.
Let me explain…
When a public company is in dire financial straits – with too much debt, not enough cash and financial metrics going the wrong direction – there’s usually an effort to get the banks or other lenders and/or big investors to figure out a way to work things out.
If thing…