How to Handle Corporate 'Bankruptcy Rumors'

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By William Vogeler, Esq. on October 24, 2018 2:30 PM

No matter what you think of Donald Trump as a president, he is good at surviving bankruptcy.

His companies filed for bankruptcy six times, yet he emerged a billionaire. Whatever his legacy may be, there is a lesson to be learned from his bankruptcy strategy.

How do you do bankruptcy? Better yet, how do you handle rumors that your company is going bankrupt?

Doing Bankruptcy

Trump never filed for personal bankruptcy -- just his hotels and casinos. That was part of his secret: don't put up your own money.

He also did what most corporations do when they fail. Leave the burden on investors.

Sears, for example, was a "cornerstone of American retailing" for 100 years. But despite its venerable name, Sears left shareholders holding the bag of liabilities.

Love it or leave it, it's more or less the American way.

Handling Rumors

Bankruptcy rumors are another thing. Like rumors of death, they can quickly be exaggerated.

David's Bridal, the nation's leading bridal retailer, is dealing with that now. The company recently missed a major loan payment, leading to rumors that the company may soon file for bankruptcy.

Managers are telling customers "there is nothing to worry about." That's fine for customers, but it's a different story for investors.

Customers bargain shop when companies are going out of business; investors want to sell. Insiders should just hold on because that's probably the best way to deal with the rumors.

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