Originally Posted by youra6
If the gov can bail out AMD (or anybody) like they did with Ford or GM, then I will buy 1000 shares of AMD right now, and possibly more later.
They do not need a bailout. A company is considered bankrupt when they can no longer pay their current debt obligations and it appears AMD is far from that. Their drop in stock price is driven by their negative net income for 3 out of 4 of the last quarters. It is also probably slightly impacted by the rumors of a sell off. If you look at their financials here
, their current asset to current debt ratio is 1.81. Current assets are monetary objects which the company is able to sell or use in the short term to pay off debt obligations, that is, things such as cash or short term loans. Current debts are those debts which are coming maturity, that is, those loans that need to be paid off.
For a healthy company, a good CA/CD ratio ranges from 1.5 to 3. With that ratio of 1.8 they are within this margin. On top of this they have a total Asset to total debt ratio of 2.266. This means they have 2 times the amount of sellable assets than they do liabilities. They are not about to go bankrupt anytime soon.
The only thing that buying up their stocks would do is increase their market price, assuming you are purchasing at a price above market value. In actuality, it is not giving AMD any additional money. Stock price only matters when their are issuing new stock and market value has no actual reflection on the worth of a company.
Corporations have two ways to fund new projects: a. issue new stock to acquire more equity in the company, that is, more cash from investments, or b. acquire additional debt, that is, loans. With such a low total asset to total debt and low CA/CD ratio they are not in any immediate risk of being overloaded with debt. They could easily take on an additional couple billion in loans if they need to.
Everyone should relax. AMD is not anywhere near going into bankruptcy. Companies generally go through periods of losses. If anything, this is a sign of new management coming in soon. It is obvious that the current executives are under performing and this will likely result in their dismissal from the corporation should this trend continue. It is clear in their latest string of hardware that they are falling behind in key sectors.
AMD is fine. Look at their financials and metrics for measuring their healthiness.
If you have any questions, I am more than happy to answer them. I be a fourth year Finance and Information Systems student.