Why no real estate company is on this list.
Recently, The Business Insider listed the “Ten Big Companies That Are Veering Toward Bankruptcy”. To compile the list, first, TBI obtained the results from August Integrity which used a bankruptcy model 20 times more accurate in prediction than other models. TBI then “… took the list and removed any company with a market cap under $3 billion… ranked the remaining names by a simple measure of the market’s perceived bankruptcy risk – Market Cap (MC) divided by Enterprise Value (EV). The less MC vs. EV, the less residual shareholders’ value (above what debt holders can claim) the market is pricing-in for the company. Thus a lower MC/EV means the market thinks the company is more likely to go bankrupt.”
Making the list are car rental giant Hertz, jet maker Textron, telecom firm Sprint-Nextel, high-end shop Macy’s, pharma corp. Mylan, Goodyear, media leader CBS, semiconductor maker Advanced Micro Devices, ad guru Interpublic Group, and casino resort group Las Vegas Sands Corp. (LVSC).
Except for LVSC, which basically has amusement development through its resorts, we’ve noticed the lack of real estate companies letting off steam in a very challenging economic period. Not that we’re eager to find one (and yes, not to laugh about it) but we decided to find out the reason why this has occurred – considering the spate of bankruptcies among developers, builders and designers.
Of the 2,500 companies, only a few are mentioned in its free report for the public. Of these, only Apartment Investment and Management Co. ranked high in the research. APIMC is a REIT firm that manages apartments all over the country.
We thought of two reasons why real estate companies are hardly visible. First, no one might be on the verge of bankruptcy anymore because most of them have gone out of business already. Or second, it could be because the market is starting to pick up and RE firms’ market cap rates are starting to rebound. But we’re betting on our first guess. They’re in a sorry state, so why choose to brand them as critical, right?