Sirius XM shares drop on reports of possible bankruptcy - MarketWatch

Real world example for yesterday's class...(ok so I was a few hours late ;) )

Sirius XM shares drop on reports of possible bankruptcy - MarketWatch:

"Shares of Sirius XM Satellite Radio Inc. dropped 31% in morning trading Wednesday on reports that the company could be close to filing for bankruptcy protection.
The shares were down 3 cents at 8 cents. The stock traded in the $4 range two years ago.
Sirius XM is working with bankruptcy lawyer Mark Thompson of Simpson, Thatcher & Bartlett, and Joseph Bondi, a restructuring expert, to set up a Chapter 11 filing that could come in the next few days

Bankruptcy costs (both the direct costs : lawyer fees etc. and the indirect (messed up incentives, loss of reputation, etc) are a subset of the larger financial distress costs. Which amazingly enough is exactly what we talked about in Finance 402 yesterday.