As the global economy continues to take new shape in its recovery from the Covid-19 pandemic, many companies are still reeling from the high costs and supply shortages the health crisis triggered.

And a significant number of them are filing for bankruptcy.

Related: Another company files for bankruptcy and Dave Ramsey has words

Major bankruptcy filings in 2023 included the working space company WeWork in November, drug store retailer Rite Aid in October, and Bed, Bath & Beyond in April.

The trend has continued in 2024. In fact, telecom company Airspan Networks Holdings  (MIMO)  filed for a prepackaged Chapter 11 bankruptcy in Delaware on March 31.

A lot of the news around bankruptcies involves how companies are restructuring their debts or going out of business entirely. But if a company that files for bankruptcy has a stock that is publicly traded, the question of what happens to shareholders is worth examining. 

In Airspan's case, existing holders of stock have been given two options. One is to receive their pro rata share of $450,000. The other is to elect for warrants instead of cash. But if more than 150 shareholders decide to take the warrants, no warrants at all will be given.

A pro rata share is the cash value of a proportionate number of owned shares based on the determined total value.

A warrant is similar to an option, where the holder can purchase a security at a specific price and quantity at a future time. But unlike options, warrants are issued by a company rather than a central exchange.

What bankruptcy means for the people affected

The thought of bankruptcy is scary for companies, their employees and shareholders.

The companies themselves would enter a reality where they are forced to ponder their very survival.

Employees, naturally, wonder about the security of their jobs.

The impact on shareholders of a company filing for bankruptcy has a few layers of complexity.

In Chapter 7 bankruptcy, a company is simply going out of business. It sells its assets to pay off debts. Shareholders are left to split what's left, if there is anything remaining at all. If there is not, shareholders can get nothing.

When a company is considering filing for Chapter 11 bankruptcy, it is likely looking to restructure and stage a comeback. If shareholders are brave enough to hold onto their shares during this process, which is risky, they at least stand the chance of making some money back.

For example, car rental company Hertz  (HTZ)  filed for Chapter 11 in May 2020 as the Covid-19 pandemic wounded the travel business generally. While the stock has struggled recently, the company did come out of bankruptcy in July 2021.

In bankruptcy events, shareholders are last in line

When a company goes bankrupt, hanging on to its shares is dicey business. Shareholders could wind up with little or nothing, but they may be rewarded for their patience. 

In the short term, the stock is probably already down at the filing and is destined to stay that way for a while. But in the long term, there may be hope for a revival.

Shareholders are the last ones to be considered for payouts. First to get any money from liquidated assets or cash advancements are secured creditors such as banks holding mortgage or equipment loans, for example. Unsecured creditors, including banks, suppliers and bondholders are next. Then come the shareholders.

"The stock could very well become completely worthless," writes The Balance. "But there’s always a chance that the company could emerge from bankruptcy stronger and stock prices may rise. In the short-term, however, the stock price is likely to stay very low during bankruptcy and immediately after."

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Credit: 2024 Poudel et al.

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Malls are dying. Blame Amazon.

That's a popular refrain, but it's not true.

"Shopping-mall foot traffic is nearing prepandemic levels, but not everything is the same — that’s a main takeaway from a new white paper by foot-traffic-analytics firm Placer.ai, The Comeback of the Mall in 2024.

Malls aren't a dying business model; instead, people are visiting different shopping malls.

Related: Popular brewery files Chapter 11 bankruptcy, faces liquidation

"The white paper finds that during 2023, visits at indoor malls were down 5.8% compared to 2019 — a dramatic improvement from being down more than 15% in 2021," Placer.ai reports. 

"Similarly, open-air shopping-center foot traffic was down only 1% last year compared to 2019. The white paper notes that visits for the shopping-center industry at large were down 2.3%, and foot traffic may yet pick up again in 2024.”

All this does not mean that some mall retailers have not been hurt. The covid pandemic changed people's needs, especially when it comes to clothes.

Hybrid and work-from-home models require more casual clothes and athleisure wear. In addition, mall foot traffic does not always mean people shopping in stores.

"Experiences are key in driving mall traffic," Placer.ai reported. "Adding entertainment or dining options can help bring crowds in – and keep them there. ... Malls received visit boosts following the additions of new dining and entertainment options like Texas Roadhouse and Main Event, indicating that shoppers are responsive to many kinds of retail."

In addition, the covid pandemic added to debt for many mall-based retailers, and one well-known brand appears to be headed for bankruptcy.

Express's problems are piling up

In March, Express  (EXPR)  received a delisting notice from the New York Stock Exchange,

"The company’s common stock will now trade publicly on the OTC Pink Market under the symbol EXPR," the retailer said on its website. 

"This transition to the over-the-counter market will not affect the company’s business operations or its U.S. Securities and Exchange Commission reporting obligations, and it does not conflict with or cause an event of default under any of the company’s material debt or other agreements."

In its third-quarter-earnings report, the company reported a $28.7 million operating loss, narrower than the $29.5 million operating loss in the year-earlier period. Express's net loss was a little wider: $36.8 million, or $9.83 a share, against a net loss of $34.4 million, or $10.09 a share, a year earlier. (Almost 10% more shares were outstanding in the current period.)

At the close of the quarter, the retailer had cash and cash equivalents of $34.6 million and $274 million in debt. That was a $40 million increase in debt over a year.

Express exploring Chapter 11 bankruptcy

Express has been talking to lenders about raising the cash it would need for a Chapter 11 bankruptcy, according to a report from Bloomberg. The company could file for bankruptcy as soon as next week, but no final decision has been made.

Despite the company's cash position and debt, Rapid Ratings, which tracks the financial health of public companies, sees Express as being in a relatively good position.

"Express Inc. demonstrates adequate performance in leverage and earnings performance but some weakness in liquidity. Although mixed, this performance is sufficient for the company to be assigned a Low-Risk rating," the website reported.

The rating service did issue a warning.

"This period includes an abnormal item. When the rating for this period is simulated with the abnormal item excluded, the company's health is significantly worse suggesting the line item is having a meaningful effect on the rating for this period," according to the service.

Express leadership issued the expected comments on its future in the news release on being delisted by the NYSE.

“Over the past several months, we have taken decisive steps to position Express for the long term, including implementing a series of cost-saving initiatives and streamlining our process to enhance operational efficiency,” Chief Executive Stewart Glendinning said. 

“We remain focused on continuing to serve our customers and positioning our organization for the future.”

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