The company reorders its debt, its equity or its business perimeter, usually because the current structure cannot be sustained. Value shifts between creditors and shareholders, and equity is normally paid last.
Value shifts between creditors and shareholders; the catalyst is the approved plan.
Live deals are shown with your account, according to your plan.
The mechanics, step by step.
Step 1
The problem is acknowledged: maturities, broken covenants or sustained losses.
Step 2
A plan is negotiated with creditors.
A company emerges from bankruptcy: its debt falls from 1,000 to 300 million and the former bondholders receive the new shares. Many cannot keep them and sell.
Forced sellers set the entry price; the value depends on the new balance sheet, not the old one.
Hypothetical figures to explain the mechanics. Not a real case and not a recommendation.
Step 3
The plan is approved and, depending on the case, sanctioned by a court.
Step 4
That approval is the catalyst: until then the price is trading uncertainty.