Thanks Rufus. One more question: Why would RFXCQ still be trading at $1 if the shares are pretty much worthless? I know that shorts are covering and people are hedging against their option positions but there's has to be a ton of sellers (127.5 million shares outstanding). I guess my real question is, why would anyone initiate a new naked long position now after they filed CH 11? Thanks!
The stock is basically worthless. A little about bankruptcy. In most cases, bankrupt companies have negative net equity (remember A=L+SE). This means that the liabilities are greater than the Assets and SE is a plug figure. As a result, the companies aren't able to pay to service the debt (i.e. the bankruptcy) and of course their assets aren't enough to pay off the loans. As a result, in the bankruptcy proceedings, parties agree to new terms. At this point, equity owners don't have a say. Instead, some of the debt is witten down, some assets sold off, cash from these assets are used to pay off as much debt as possible. In addition, new equity is often issued and given to these debt holders and old equity is cancelled out. This means that the equity holders get nothing (remember, their equity was worthless). Now bringing this back to Refco. RFX or RFXCQ.PK owners own the whole company, not a specific division. Refco is selling a division to Flowers. The cash then goes to Refco the parent company. This cash should then be fed back to the debt holders, based on preference of their claims. If anything is left over, it would go to the equity holders. Now as it stands, even at $768 that isn't enought to pay off all the debt. The best equity holders could expect is if other units could be sold off for total proceeds over the approx 1.2 Bil or whatever the figure now stands at. Finally, in my opinion, it would be stupid to operate Refco's futures division under the Refco name. While it's a known name, in the day of corporate scandals they would be stupid to maintain the same name.
It is possible that some individuals would choose to bottom fish, now at $0.65. Keep in mind that not all of the 127 Million shares are floated, only around 20-22 Million shares was floated at the IPO, rest of the shares are subject to the 180 day lock up period. I will go further by saying that a good portion of the 127 Million shares have not even been issued, just reserved by Refco treasury. It is possible that there are some value in the shares. If the old financial numbers are to be believed, Refco's debt-asset ratio was quite good, and it still have receivables from the non-futures related business. So it is feasible that the shareholders should receive some money. Is it greater than $14M? I am not sure, but I bet that if someone parses through the entire S-1, factor in the futures regulatory capital sold to Flowers, the $430M cash from Bennett (it is cash, after all), subtract off the secured debts, it is possible to determine the firm value.
I hate Refco for destroying Cargill investor Services. God bless those Cargill staff who transit over Refco.