Wednesday, June 23, 2010

Suing Yourself

"New York state's pension fund plans to sue BP Plc to recover losses from the drop in the company's stock price following the worst oil spill in U.S. history, Comptroller Thomas DiNapoli said on Wednesday."

""BP misled investors about its safety procedures and its ability to respond to events like the ongoing oil spill and we're going to hold it accountable," said the comptroller, a Democrat, who stands for election in November."

Come on, DiNapoli - just say you're doing it as a political ploy to be re-elected, and we'll all understand.  Now - let's not even bother to debate if the suit has merit - what is the point?  As a commenter on Clusterstock put it:

"This is idiotic. How is BP going to make the stock holders full? By taking money out of its coffers? If so the stock price would fall further. Net effect would be zero change in the wealth of stockholders."

Another commenter sarcastically noted:

"This is a wonderful scenario. BP shareholders who don't sue will bailout BP shareholders who do sue."

Lawsuit arbitrage!  Fantastic!

So, see, the problem is that the shareholders ALREADY own the company. So when they sue the company, they are suing themselves.  And the lawyers get rich in the process.  Sweet.

"One day next month every student at Loyola Law School Los Angeles will awake to a higher grade point average.  

But it’s not because they are all working harder. The school is retroactively inflating its grades, tacking on 0.333 to every grade recorded in the last few years. 

The goal is to make its students look more attractive in a competitive job market."


I don't think this post would be complete without the Jerky Boys classic:


disclosure:  I have a small long BP stock position


JT said...

more tragedy of the common on BP kid (knowing this goes nowhere)? Pension fund gets X, stock goes down X, but Pension fund is %X so they benfit. they cost everyone equally on bogus legal fees to defend if it goes that far. In all fairness I'm reading Pauly and drunk as hell.

Anonymous said...

Keep your eye on the ball, Kiddo. Judgment creditors have priority over lowly shareholders in bankruptcy. Capisce?



Kid Dynamite said...

yeah yeah tz - but that just makes it so that everyone has to sue to stay "on pace". silly.

Anonymous said...

We'll see. But don't forget that creditors can do some interesting things in Chapter 11, like force the conversion of debt to an equity stake in the re-formed company, especially when somebody shows up with big cash. You can basically have a hostile takeover which can be pretty sweet for people net net who play their cards right. IMO the current BP Board and senior mgmt would be vulnerable. And guess how a lot of their compensation has been structured... Hee hee


Daniel said...

Long BP plus the long GS option position. Are you a glutton for punishment or you're just looking for an excuse to go back to work....