Closing A Short Position On A Bankrupt Company ??

[BOR]

Just watched the shares of a company drop after they anounced they were about to cease trading. I follow that bit.

Then their share price rebounded (from f.all to 4x f.all), which I don't understand. The only logic I can see is that people may need to close short positions, purely as a formality.

I have to say, I'm curious. Anyone know why the price would recover, for what are theoretically worthless shares ?

[NewNameNeeded]

possible takeover from someone thinking the underlying assets in the company be it knowledge, client base, equipment, etc makes it worth acquiring and continuing in some form or other?

[Ade355]

The assets might be worth more than zero upon disposal. There might be significant goodwill associated with the brand etc. If the company obviously has debts that are lower than the combined assets then it might be worth owning a portion of the company throughout the wrapping up process - just depends I guess on who gets what and who gets paid first etc.

[Horse_Apple]

BOR said:

Just watched the shares of a company drop after they anounced they were about to cease trading. I follow that bit.

Then their share price rebounded (from f.all to 4x f.all), which I don't understand. The only logic I can see is that people may need to close short positions, purely as a formality.

I have to say, I'm curious. Anyone know why the price would recover, for what are theoretically worthless shares ?

Could have been shorts closing, but you'd need to have a look at the company to get a better feel. i.e was it public that the stock was in trouble and more importantly, was there a stock lending facility?

Otherwise, it may well be an existing shareholder buying up stock to have more leverage during the administration if there are any worthwhile/desired assets in there.

Or, it could have been an MM trying to bump some more business out.

[BOR]

Thanks, all.

Just curious.