Shareholder will be the last to receive payment in Oi's judicial reorganization.
A request for judicial reorganization aims to help the company overcome its crisis and debts, allowing it to return to its original activities in a healthier state; however, if everything goes wrong, the last person to receive anything will be the shareholder; if bankruptcy becomes a reality, the company's assets will be auctioned off, and employees, taxes, and creditors will be paid in this order; lastly, the shareholder.
SÃO PAULO - After much speculation, the Oi (OIBR4) telephone company confirmed on Monday night (20) its request for judicial reorganization, in the amount of R$ 65 billion, the largest ever made in Brazil. The company stressed in a statement that it will maintain its services and product sales normally. However, for those who operate on the Stock Exchange, the question always remains: what happens to the shares of a company in judicial reorganization?
The first step is the suspension, meaning that on Tuesday the telephone company's shares will not be traded on the Bovespa stock exchange. This halt in trading will last for a period to be determined by the judge in the case.
An assessment of the company's conditions and the information presented in the request will be carried out, followed by communication to the market. After the deadline set by the judge, the shares will resume normal trading, like any other, and will no longer be included in the Ibovespa index.
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So what about the options?
In the case of those operating short positions, trading will also be suspended for the same duration that the shares are frozen. The Exchange will then conduct a special auction procedure to close the positions, provided there are no administrative or judicial impediments to doing so. If there are, the Exchange will arbitrate the closing price of the positions.
The price resulting from either of these two procedures will be the parameter for exercising any options that may be exercised during the suspension period, and also for the financial settlement of stock lending transactions for those who are unable to return the shares to their owners.
What if Oi files for bankruptcy?
This is the company's final step if its recovery plan fails. Although it's still a distant prospect, it's always good to know what will happen. The purpose of filing for judicial reorganization is to help the company overcome its crisis and debts, allowing it to return to its original activities in a healthier state.
However, if everything goes wrong, the last person to receive anything will be the shareholder. If bankruptcy becomes a reality, the company's assets will be auctioned off, and employees, taxes, and creditors will be paid in this order. Last, the shareholder.