The frenzied stock purchases that may have saved AMC Entertainment Holdings Inc. from bankruptcy also provide a potential escape hatch for other troubled borrowers.
More and more companies facing major financial challenges are looking for a lifeline in the stock markets to capitalize on the growing interest in buying stocks from non-professional investors. Earlier this month, the Peabody Energy Corp. coal mine, the offshore drilling company Transocean Ltd. and the retailer Express Inc. all have plans to sell shares.
Selling stocks isn’t the typical way for distressed companies to grab a lifeline. More often, they are forced to seek rescue loans, dispose of assets, or pursue a merger, which can be difficult because of their existing debt.
But stock markets are now more open to assisting troubled issuers, in large part due to risk-hungry individual investors who are speculative, according to bankers and investors who are following the trend.
The planned stock sales, if successful, mark another path in which non-professional investors have reshaped financial markets since they began to show their collective power last year, creating opportunities for financial managers in the process.
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