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  5. AKU: I just received a Chapter 11 notice on a small holding I have AKUMIN. [Akumin Inc.]
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Q: I just received a Chapter 11 notice on a small holding I have AKUMIN. Another in a long line of US Healthcare companies that list in Canada and go bust! Looking at the trading history on your site, it looks like it was trading very small volumes (9.5k) at around .20 for 4 or 5 months and then all of a sudden on Monday October 23rd, its last trade, was at .51 for 1,170,000 shares. Two questions 1) why would anyone buy a large block and pay a huge premium for a stock that is in trouble???.......does this not wreak of foul play? If not, why would someone have purchased these shares? 2) Is my money dead or is there hope it will come thru bankruptcy with some shareholder value? I would love your perspective as this seems really odd to me.

Many Thanks

Scott
Asked by Scott on November 03, 2023
5i Research Answer:

There are always speculators that will take positions in bankrupt companies. Companies such as Hertz surged while in Chapter 11. Greed can cause investors to do crazy things. The block was 'probably' though related to a short seller closing out a position. There is some hope. Chapter 11s go through procedures to try and salvage value and keep a company operating. The market value is still $36M, which implies some investors think it is worth more than $0. But we would temper expectations. Most times, equity holders are wiped out in a restructuring, or receive pennies on the dollar of what shares were before. Generally, we would exit such a scenario. 9 times out of ten the equity ends up at zero. And even in the other 1/10 not much is typically left over. The company has a massive debt level, and creditors--not shareholders--will be in charge of this restructuring.