Corona Chapter 11 Market Meme
Market participants have generally not understood the severity of the crisis and how it impacts the intrinsic value of common equity shares.
Much confusion arises because advisers, analysts, financial media commentators, stock pundits and traders may not appreciate the difference between market value and intrinsic value of common equity shares.
"Social distancing" - both mandated and voluntary - may remain a major part of the social and economic landscape in the US and all over the world.
Corporate debt as a percentage of equity is at all-time highs.
Second quarter US GDP may plunge by over - 30%, the largest quarterly decline in history.
Unemployment may peak at over 30%. This is higher than the peak of the Great Depression.
GDP contraction over - 30% in the second quarter may coincide with price declines in many products and services, leading to a collapse in revenues at many publicly-traded companies on the order of - 40% or more.
During the course of 2020, most publicly-traded companies may face serious insolvency risks.
This crisis is different: Severe destruction of intrinsic value means that the market value of most common equity shares will not "bounce back" to former levels any time soon.
Dividends of many companies many be eliminated and or severely slashed for both economic and political reasons.
Most common equity shareholders face severe insolvency risks. Many common shareholders will become severely diluted in recapitalizations.
Owners of common equity shares may experience severe loss of both intrinsic value and market value.
https://seekingalpha.com/article/433632 ... his-crisis