Re:EPA Orders Norfolk Southern to Conduct All Cleanup Action...
by jefftk on Tuesday February 21, 2023 @04:20PM
(#34887535)
Depending on the details, this is the same as charging a fine in money or it's worse.
Say the company is worth $1B and has 10M shares that are trading at $100 each. Now there's an accident that will lead to a $100M fine. This get priced in, the value of the company is now $900M, and the stock goes to $90/share. Whether they send $100M to the government in cash or by issuing 11M shares, either way the stock price stays at $90 and investors are equally affected.
On the other hand, if the amount of the fine is higher than the value of the company you'd much rather be a creditor than a shareholder, since in bankruptcy the stock goes to zero.
Say the company is worth $1B and has 10M shares that are trading at $100 each. Now there's an accident that will lead to a $100M fine. This get priced in, the value of the company is now $900M, and the stock goes to $90/share. Whether they send $100M to the government in cash or by issuing 11M shares, either way the stock price stays at $90 and investors are equally affected.
On the other hand, if the amount of the fine is higher than the value of the company you'd much rather be a creditor than a shareholder, since in bankruptcy the stock goes to zero.