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Cannondale bankruptcy(12 posts)

Cannondale bankruptcytronracer
Jan 24, 2003 8:46 AM
Do you think they are going to go under? If not, the stock price is at an all time low. A sound investment?
Just about every stock is at an all time low. nmRoyGBiv
Jan 24, 2003 9:08 AM
Hah - true! (nm)jtferraro
Jan 25, 2003 6:14 AM
re: Cannondale bankruptcycarpe_podium
Jan 24, 2003 9:08 AM
I doubt that they will close their doors. Many companys file bankruptcy and come out of it better. Maybe they'll give up on the unprofitable moto-sports division. I, however, personally wouldn't buy their stock.
bankruptcy = protection from creditors...Akirasho
Jan 24, 2003 9:09 AM
... and restructuring... It doesn't necessisarily spell the end...

Indeed, depending on how they're restructured (if they do file, I'm guessing they'll have to ditch moto and possibly clothing) it could be a time to snap a bit up... along with the usual caveates for playing the market.

Be the bike.
re: Cannondale bankruptcytoomanybikes
Jan 24, 2003 9:42 AM
Given that my day job is as a Bankruptcy Trustee and most of my last year has been spent working on US Chapter 11 issues here is what would happen, if Cannondale filed.

They would have the option of filing under chapter 7 or 11 of the US Code. & is liquidation and they would not pick that, 11 is debtor-in-possession restructuring.

The end result of all of these Chapter 11's is usually a case where certain of the assets or business divisions are spun out or sold or closed (motorsports) and they can have the benefit of court orders to effect the transaction.

The debt holders are given certain assets of the company in exchange for a reduction in the total face value of their debt claims and the balance of the debt is usually converted to common equity either through cancellation of the existing common and issue of new class of voting or through issue of massive volume of new shares in existing class.

In the first case your stock is without value and is non-tradeable. In the second case your stock becomes so diluted as an ownership claim that it is essentially valueless except in possibly in the very long term through general appreciation.

If a company is in Chapter 11, or you believe it may go into Chapter 11 then stay a long way away from it as it would essentially be lost money.

At the moment this would include staying awat from companies such as

United Airlines
Global Crossing
American Airlines

Excellent advicegeeker
Jan 24, 2003 9:49 AM
There's a strange phenomenon re. nearly-bankrupt companies with stock prices under $1/share. Investors persistently buy them, keeping the stock price too high (as explained, equity holders get nothing in a bankruptcy). No matter how many articles, such as the above post, explain the situation, people tend to hope for some kind of home-run turnaround. I'd stay away.
One upsideLO McDuff
Jan 24, 2003 9:59 AM
The upside to a bankruptcy filing would be the all the great deals the consumer would have while inventory is liquidated for cash.
if there is any inventorylaffeaux
Jan 24, 2003 10:06 AM
When Ibis went under there were no deals to be had, as there was no inventory. I was hoping for a TI road bike, but as it turns out, all they had were empty shelves.
and another onecyclopathic
Jan 24, 2003 1:22 PM
no warranty on those great deals
a little speculationNo_sprint
Jan 24, 2003 1:29 PM
Cannondale will not go under nor will their bikes stop being made. If it gets to the point where they're going to close shop, Trek :) will swoop in, buy the plant, the name, keep many of the same employees and resume operation almost seemlessly. The name is just too big, the sales just too large for someone not to want it. It's pretty obvious from all I've read, the expansion efforts are where they burned themselves. The bicycle operation alone must be profitable.
A different look....Texican
Jan 24, 2003 3:08 PM
Just pulled up some fin. #'s on ticker "BIKE"(real cute!) Not reviewing any information other than what is available on at work and all)a couple of sore point from the 9/02 financial highlights.

From the Income Statement
-Sequentially declining sales going into the 4Q02, as I don't follow the bicycle retail industry this could simply be seasonal.
-Sequentially declining gross margins from low 23%4Q01 to 18%3Q02, maybe inline with the industry, maybe or some loss of pricing power, who knows, but those are the numbers.
-50% increase in Operating loss versus 2Q02 and 140% increase in Operating loss versus 1Q02, again a possible seasonal low after the holiday season of 2001.
-Net Income loss grew at a faster rate than Operating losses, this of course is also bad.

From the B/S
-Cash appears readily stead at $1.2mm, but only slight lower than beginning of FY2002.
-Current Long Term Debt has jumped from $45mm to $73mm. So unless Cannondale has a sizeable credit revolver to basically replace old debt with new, it will have to issue bonds or equity. Given the stock price, its likely to be high yield bonds as the company has a balance sheet of less than $110mm as of 9/31/02.

Tons of other holes in the Cannondale financials I'm sure, but it only reflects what is already know, the expanision is causing the company significant pain compounded by a slow to recover economy. Wouldn't be suprised if some major financial news came out this or next quarter given the principal notes due within the year.

I'm not even touching the statement of cashflows... where all the juicy information is hiding.