TROY, Mich. (CBS.MW) — Kmart attempted to calm the rising tide of frustration and anger among former shareholders by telling them a simple truth: There’s no money left.
In a question-and-answer note on its Web site, the company again informed holders of stock under the KMRTQ ticker — designated for shares trading in the pink sheets after the company went into bankruptcy — that their shares were worthless.
“When the company emerged from Ch. 11 on May 6, the previously issued common stock was cancelled and, as such, trading has ceased,” Kmart
Kmart made retail history when it became the largest merchant ever to seek bankruptcy protection in January 2002. This week the company came out in what was considered a fast-track reorganization.
New shares were issued under Kmart Holding Corp., with the ticker KMRT
different from those issued as Kmart Corp., the predecessor concern. The company distributed the new shares to holders of prepetition bank debt, most of which went to ESL Investments. Other unpaid creditors, vendors and landlords are in line for limited distributions through June. The company is not issuing new shares.
Kmart explained that under federal bankruptcy laws, holders of common stock of a company that has sought Chapter 11 protection “are the lowest in priority” when it comes to recovering their investments.
“In Kmart’s case, there wasn’t enough money to distribute to the other creditors to allow for shareholders to be eligible to receive a recovery,” the company said.
The notice came after a bevy of shareholders complained that their investments in the company were wiped out. Kmart has long acknowledged that it would issue new shares when it came out of bankruptcy and that the former shares would be cancelled. In a Securities and Exchange Commission filing earlier this year, the company said holders of common stock would not be issued new shares.
Still, trading in the pink sheets was very heavy leading up to the final day May 6, when shares closed higher by 3 cents at 10 cents. More than 91 million shares changed hands.
View more information: https://www.marketwatch.com/story/kmart-to-old-shareholders-nothing-left-for-you