There were a few things that were hard for me to follow in this article:
1. If the company was worth $1B before as X before selling it to Y, wouldn't Y+X be at least worth $1B?
2. If L&H made fraudulent claims, why not make a claim against L&H to recover the software, brand, intellectual property? According to the Wikipedia page (http://en.wikipedia.org/wiki/Lernout_%26_Hauspie) their software ended up being bought by Nuance (Siri).
The people holding Bernie Madoff paper had no trouble standing in line for a share of the recovery, and the people who had gotten too much out had no barrier to getting it clawed back.
Comments
There were a few things that were hard for me to follow in this article:
1. If the company was worth $1B before as X before selling it to Y, wouldn't Y+X be at least worth $1B?
2. If L&H made fraudulent claims, why not make a claim against L&H to recover the software, brand, intellectual property? According to the Wikipedia page (http://en.wikipedia.org/wiki/Lernout_%26_Hauspie) their software ended up being bought by Nuance (Siri).
Here is a better example:
X = acquiring company, worth $2B ($1B in debt, but future earnings valued at $3B) Y = acquired company, worth $1B ($0 debt, $1B future earnings)
Merger:
X+Y = $3B (+ some factor account for cost savings or new revenue streams)
Company X was lying about their sales:
X+Y = $0B ($0B from future earnings, $1B in debt + $1B from company Y)
Company declares bankruptcy and debtors come in and get every asset with any value. Shareholders value = $0.
Bankruptcy is a laundromat for assets, it's pretty much impossible to get them back.
The people holding Bernie Madoff paper had no trouble standing in line for a share of the recovery, and the people who had gotten too much out had no barrier to getting it clawed back.