A123 Systems Auction Result

A123 Systems Auction Result

 

http://www.nytimes.com/2012/12/10/business/global/auction-for-a123-systems-won-by-wanxiang-group-of-china.html?_r=0

In the previous post, I said I still have 10% of initial position entered at $0.06 and ready to add more shares after auction result. We have the results now. 

Chinese group Wanxiang win the auction with $256.6 million. 

 

Let's look at the Chapter 11 report to see the company's asset and liabilities as of October 31st. 

http://ir.a123systems.com/secfiling.cfm?filingID=1104659-12-82503&CIK=1167178

The report showed asset of $511,087,000 and liabilities of $370,465,000! The problem is if Wanxiang is paying $256,600,000...that won't be enough to cover all liabilities and shares are likely to have no value. This explains why AONEQ dropped 67.68% today. 

 

Doing my due diligence...I looked further into the document and found this:

In liquidation process, there are 1) secured creditors, 2) unsecured creditors (grouped under "Liabilities subject to Compromise"), and 3) shareholders. 
If we sum the debts with liabilities subject to compromise together, we get $242,682,000, subject this from $256.6 million Wanxiang agrees to pay that will give us $13,918,000. However they still need to pay expensive court fees. 
With today's drop, market cap gets down to $3,670,000. 
I have no way to determine the court fee now, and this is not a large enough margin to the risk investors need to take for this operation. I will not add any position and will likely sell my remaining position soon.