i was wondering if someone could explain what it means when people say "equity is wiped out".
i know it means that the equity owners get nothing and lose all their money but i was hoping someone could explain the mechanics of how that happens.
i'm asking in context of bank nationalization where the news outlets say "nationalizing a bank would wipe out shareholders".
thanks for the help.
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if the sum of the liquidated assets is less than the firm's liabilities? bondholders come before shareholders in the liquidation preference so there might be no money left for the shareholders after the bondholders are paid? not sure tho
Preferred shareholders are generally ahead of common ones as well.
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