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Bankruptcies: Who Regulates The Markets?

|Includes:American Airlines Group (AAL), GNTAQ, KODK, MFGLQ, TRIDQ

This same question will be made by the investors in MF Global Holdings (MFGLQ.PK), Trident Microsystems (TRID), Eastman Kodak (EKDKQ.PK) and AMR (AAMRQ.PK). One day, they were awakened by the news that made them lose their investments in these companies. A few years ago, there was a controversy in the market with the bankruptcy of Midway Games because its executives had not lowered their wages before the final closure. In this article we are going to analyze whether these bankruptcies could have been avoided with a reduction in the wages of the executive committee and we will talk about a company of dubious management.

The table below provides information of the compensation of the executive committee collected during the past three years.

Executive Compensation 2010 2009 2008
AMR 19,50 16,01 14,60
Eastman Kodak 11,68 26,41 15,38
Trident Microsystems 5,59 5,24 7,17
MF Global Holdings 13,20 34,70 52,69
*All numbers in thousands. Source: Morningstar.com

In the table we have seen as a reduction in the compensation of the management team can help companies are found in these market situations.
In the following table, we are going to expose the annual net income result of each company.

Net Income 2010 2009 2008
AMR (471,000) (1,468,000) (2,071,000)
Eastman Kodak (687,000) (210,000) (442,000)
Trident Microsystems (128,889) (70,232) 10,152
MF Global Holdings (81,173) (136,969) (49,058)
*All numbers in thousands. Source: yahoo.com

In some of the cases previously mentioned, losses and wages are increased at the same time. We could take as a reference Trident Microsystems that increased its losses by 83% while wages incomprehensibly increased a 7 %. Finally, we are going to see the case of a company in which the managers never seem to have been controlled. Who regulates in these companies that the best decision is to dismiss the productive staff.

Genta (GNTA.OB) is a biopharmaceutical company engaged in pharmaceutical (drug) research and development. The company is engaged in the identification, development and marketing of drugs for the treatment of cancer and related diseases. A shareholder who purchased shares of Genta on its output to the Nasdaq market recover their money if Genta is quoted over $27,750. In the following table may check the amount of reverse split that has made the company.

Date Reverse Split Rate
04-07-1997 1:10
07-13-2007 1:6
07-13-2009 1:50
08-02-2010 1:100
02-18-2011 1:50

The reverse split above was always accompanied by increases in authorized shares. Currently a debt holder has a conversion system agreed for the issuance of 8 billion shares at an average price located in $0.0015 . In my opinion, is a good time to open short positions in Genta. Any new attempt of a reverse split will make the company traded at $0.0001 .

Conclusion
Markets change as well as the strategies in the management of many companies do so. In my opinion, you must collect the maximum information you could before investing in any company. Be cautious.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Stocks: AAL, KODK, GNTAQ, MFGLQ, TRIDQ