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Effect
On Investors
There
is not much hope for stockholders looking to recoup lost investments.
Stockholders legally would have the right to some money, but in
most situations they are at the bottom of the list and get nothing.
MCI stockholders can't even console themselves with a dividend payment.
WorldCom said Thursday it won't pay the final $.60 dividend on its
MCI Group tracking stock in light of the carrier's precarious financial
health, saving the company $71 million. Last year, the carrier created
a separate "tracking" stock for its declining MCI consumer
long-distance business in hopes of isolating that unit from WorldCom's
seemingly stronger data, Internet and international operations.
In May, WorldCom announced the elimination of the MCI tracking stock
and suspension of its dividend, a move the company said would save
about $284 million a year.
WorldCom was recently delisted from the NASDAQ Stock Market. Delisting
could force institutional investors out of the stock and make it
more difficult for the company to raise cash through future stock
offerings. This could also scare off corporate accounts.
If WorldCom declares Chapter 11 bankruptcy, bondholders should not
expect to receive interest and principal payments and shareholders
will not receive dividends. Bondholders may receive new stock in
exchange for bonds, new bonds, or a combination of stocks and bonds.
The majority of bondholders are banks' investment departments, insurance
companies and pension funds.
Stockholders may be asked to send back their current stock in exchange
for shares in the reorganized company. New shares may be fewer and
worth less. The worst case is if stockholders' shares are declared
worthless because the company is declared insolvent. The IRS can
provide information about reporting worthless stock as a loss on
income tax statements
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