Why Stock Prices Of Insolvent Firms Can Still Be Positive

By J.B. Heaton (December 5, 2017, 12:07 PM EST) -- On Nov. 29, 2017, Cumulus Media Inc. filed for Chapter 11 bankruptcy protection in the U.S. Bankruptcy Court for the Southern District of New York. The stock price had fallen from $1.06 on Dec. 1, 2016, to just over 15 cents per share at the close of trading on the bankruptcy filing date. The market capitalization had fallen from about $30 million to under $3 million. But $3 million is still greater than zero. Was Cumulus solvent when it filed bankruptcy? The answer is almost surely no. It is important that lawyers dealing with firm solvency have a good understanding of the reasons why....

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