Buying all the float of a bankrupted stock like LEHMQ (LEH) or WAMUQ (WM).

Discussion in 'Trading' started by Option Trader, May 2, 2010.

  1. It would seem to me for stock like LEHMQ and WAMUQ the shorts would NOT be quick to cover thereby avoiding paying taxes on their gains.

    If so, what would happen if big buyers came in to buy up ALL the outstanding float of the stock. Could they not bring the stock back up to $50, and pressure shorts into covering?
     
  2. What do you mean bring the stock back up to $50?
     
  3. It won't happen there because they won't capture all the float. But what about if all the float of a stock is captured?
     
  4. I don't think it would really change too much. It's not like one person purchasing all of the shares changes the demand for those shares.
     
  5. It would seem highly unlikely that anyone could move the price of these because the float was so large when they went under and they're all bagholders now. People currently holding near worthless wallpaper would jump at the chance to get something back (I'm talking nickels and dimes). As fast as your "big buyers" came in, sell orders would swamp them. Once all sellers were exhausted, who then would buy this crap? AFAIK, it's a fantasy :)
     
  6. Let's say on the day a stock with a small float goes bankrupt, you have a group of people (with no formal contract between them) who each buy 9.9% of the stock, and who only will start selling at 30 times the price, what could the shorts do? Would this be called collusion even without a formal agreement? Is their any celing price (maybe the closing price on the day before bankrupcy) for the stock before the plug is pulled?
     
  7. Suppose a group of people start buying all the VCRs available in stores, circa 30 bucks apiece and will only start selling at $60 apiece. What's the incentive for people to buy something that's soon to be a "Do you remember when?" item? (think Betamax)

    Better yet, if it's such a good idea, why hasn't it been done a gazillion times before now given the multitude of companies that have gone bankrupt since almost the beginning of time ??

    FWIW, the bankrupty of LEH on Monday 9/15/08 gave me by far and large my best one day trading day ever. They're my heroes!!