WorldCom/MCI Stockholder Web Site

Frequently Asked Questions


  • Why is the stock still trading?
  • Who is buying/selling the stock at these prices?
  • What is the company's proposed reorganization plan?
  • The company's proposed plan is so unfair to stockholders. Isn't there some other plan that would be better?
  • What is the proposed legal strategy?
  • Please explain the bankruptcy process.
  • Please explain importance of the creditor and equity committees.
  • Why didn't the U.S. Trustee appoint an equity committee for WorldCom/MCI?
  • What is the significance of the fact that the Trustee did not appoint an equity committee for WorldCom/MCI?
  • Why did a company from Clinton, Mississippi file for bankruptcy in New York City?
  • Last year WorldCom/MCI reported assets of over 100 billion dollars. Their last 8-K statement reported assets of 10 billion dollars. What happened to the other $ 90 billion dollars?
  • Why do we need to create our own legal fund?
  • Why won't the lawyer work for a percentage of the award?
  • What will happen to any money that is left over in the legal fund?
  • How can the stockholders lose everything? It is so unfair!
  • As stockholders, why don't we just vote in a new board of directors?
  • Should I buy or sell my WorldCom/MCI stock at this time?
  • I own 'MCI' stock, not 'WorldCom' stock, Won't I be O.K.?
  • Where did you find this Lawyer? How do we know he won't just take our money and not really do anything?
  • How do we know that Neal Nelson is not a crook? Maybe he is going to just take our money and not really do anything.
  • Why doesn't congress do something about this outrage?
  • Why doesn't the SEC do something about this outrage?
  • Why doesn't the U.S. Trustee do something about this outrage?
  • Why doesn't the judge do something about this outrage?
  • What kind of committee is this?
  • Who is Neal Nelson? Why is he doing this?
  • Does it cost any money to "join" the group.
  • What do I have to do to join this group?
  • What use will be made of the information I enter when I join?
  • What is going on now? What happens next? How long will it take?
  • What is our next step?
  • Is the stock worthless?
  • Should I sell my stock? Should I hold my stock? Should I buy more stock?
  • What happens to the company when the bankruptcy process ends?
  • What about those class action lawsuits?
  • Why is the stock still trading?

    Once the stock is "issued" (sold by the company to outsiders) the company loses control of it. Those people that own the stock can sell it to anyone at any price. An individual can choose to buy some from someone else (if he/she can find a seller that will agree to the price). The stock exchanges (NYSE, NASDAQ, etc.) perform the function of matching buyers and sellers. The stock is still trading because each day some people are deciding to sell and others are willing to buy.

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    Who is buying/selling the stock at these prices?

    I do not know and I am not aware of any way the general public can learn this.

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    What is the company's proposed reorganization plan?

    A quick summary of the plan that was created by the bondholders and company management is: 1) A new company will be created (MCI), 2) 90% of the debt held by the original WorldCom/MCI bondholders will be converted into 100% of the stock in the new company, 3) The stockholders of the "original WorldCom/MCI" will get nothing.

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    The company's proposed plan is so unfair to stockholders. Isn't there some other plan that would be better?

    I feel that a better plan would be to: 1) reduce the debt by 50%, 2) give those bondholders that turn in their bonds 50% of the stock in the new company, and 3) give the original stockholders 50% of the stock in the new company.

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    Why wasn't a better plan proposed?

    From the standpoint of the people that created the plan (the bondholders and the company management) there is no better plan. The company managers get to keep their jobs in the new company. The new company will have 30-40 billion dollars less debt (lower interest expenses, higher profits, bigger bonuses). The bondholders will own this new company after having paid 10-15 cents on the dollar to buy the bonds. What could be better (if you are a manager or bondholder)?

    The stockholders were not invited to any of the meetings where this plan was being created because the U.S. Trustee chose to not appoint an equity committee. Since there was no stockholder representation in the meetings, the stockholders got nothing out of the reorganization plan that was created in those meetings.

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    What is the proposed legal strategy?

    Our initial legal strategy was to make a standard objection to the plan and argue that the plan, and the disclosure report behind it, were flawed. Since we did not collect enough money in time to file an objection before the deadline, we will have to find another strategy. I suspect we will join with other individuals or companies that have filed within the deadline and argue in favor of those motions that are in agreement with our goals (fair treatment for the stockholders).

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    Please explain the bankruptcy process.

    There are two major kinds of business bankruptcies: Chapter 7 and Chapter 11.

    In Chapter 7 the company is "going out of business" and they don't have enough money (assets) to pay their bills (creditors).

    In Chapter 7 someone, normally the debtor in possession (original company owners or managers) but sometimes a court appointed trustee, sells off what can be sold and what money results is given to the creditors on a pro-rated basis (10 cents on the dollar).

    Chapter 11 is considered a "reorganization". If a business is basically sound but there is some problem that must be solved before it can operate profitably it can declare under chapter 11. The court will "protect" the company so that it can keep doing business while a "reorganization plan" is created that solves the problem.

    Companies used Chapter 11 to deal with asbestos liability lawsuits, etc.

    Under a chapter 11 reorganization plan the court has virtually unlimited power. It can cancel leases, "break" contracts with negotiated prices, close stores, invalidate labor contracts and so forth.

    Prior to bankruptcy, a company's board of directors is supposed to be responsible to the stockholders. In theory, the stockholders own the company, the stockholders elect the board, the board hires management, the management reports to the board, the management operates the company in a way that keeps it going (pays the bills) and continues as a viable entity (protects the investment of the stockholders).

    Once bankruptcy is filed conventional wisdom is that the management and board are transformed into the "Debtor in Position". Their obligation shifts from responding to and protecting stockholder interests and becomes a responsibility to satisfy creditor (banks, bondholders and supplier) claims.

    Under bankruptcy the company will stop holding stockholder meetings. The board of directors will not go out of office and there will be no elections to replace them. They become totally immune to any form of stockholder control or pressure.

    The legal and consulting fees for the committees are paid by the "debtor in possession" (bankrupt company). The company management hires lawyers and consultants (paid for by the company) and the creditors (bondholders) committee (which is always created) hires lawyers and consultants (paid for by the company). There is, however, almost never an equity (stockholder) committee appointed by the U.S. Trustee in a bankruptcy case.

    This means that if stockholders want to be represented by counsel in a bankruptcy case they have to pay for their lawyers out of their own back pockets. This puts the stockholders at a huge disadvantage since both company management and the bondholders have essentially unlimited legal and professional resources at no cost to them but the stockholders have to pay their own way.

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    Please explain importance of the creditor and equity committees.

    In a bankruptcy process creditors and other interested parties are formed into groups and these groups are represented by committees. The U.S. Trustee appoints the committees. The Trustee will always appoint a creditor committee. The Trustee will sometimes appoint an equity (stockholder) committee.

    The committees are allowed to hire attorneys and consultants to assist them. The bills for these professionals are paid by the bankrupt company so these professionals are working for the committees at no cost to the committee members or the members of the group represented by the committee.

    The lawyers for the committees meet with the lawyers for the company and work out a "reorganization plan". This plan is voted on by the interested parties and if approved it will be submitted to the judge. If the judge approves the plan it is a done deal and the plan will be placed in effect.

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    Why didn't the U.S. Trustee appoint an equity committee for WorldCom/MCI?

    This is a mystery to me. The rule of thumb is that if a company's assets are less than the company's liabilities there is not an equity committee appointed. In the case of WorldCom/MCI at the time of the bankruptcy filing the assets were twice the liabilities. I would have expected an equity committee to be formed immediately.

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    What is the significance of the fact that the Trustee did not appoint an equity committee for WorldCom/MCI?

    The proposed reorganization plan, which heavily favors bondholders and company management, is a direct result of the fact that an equity committee was not appointed. The plan was created in secret meetings that were conducted by the bondholders and company managment. Stockholder representatives were not allowed to attend or offer input to these meetings. The bondholder/management meetings resulted in a plan which favors bondholders and company management.

    If an equity committee had been formed and equity committee lawyers attended the meetings, there is a possibility that the stockholders would have gotten better treatment in the plan that resulted from the meetings.

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    Why did a company from Clinton, Mississippi file for bankruptcy in New York City?

    The bankruptcy court for the Southern District of New York is well known for being friendly to big money and management. It is known informally as the "rocket docket" because the judges move large and complex cases at lightning speed. One way they do this is by ruling against people that want to slow down the bankruptcy process (like stockholders).

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    Last year WorldCom/MCI reported assets of over 100 billion dollars. Their last 8-K statement reported assets of 10 billion dollars. What happened to the other $ 90 billion dollars?

    The company management makes a series of estimates of the market value of various assets. These estimates are rubber stamped by a large auditing firm and then published in the company financial statements. For example, the company owns a truck. The management can value the truck at $ 5,000.00 or $ 50,000.00. The company management will set a value, record some logic to support their estimate and submit it to the accountant for approval.

    Last year the company management wanted the company to look good so it made assumptions that were on the high side. These were approved by the accountants and published. This year the company management wants the company to look bad so they "revised" their estimates downward (by 90%). It is important for the company to look bad at this time because if the company looks healthy people will ask embarrassing questions like "Why did you declare bankruptcy? You look like a strong, healthy company." or "Why aren't the original stockholders being given some stock in the new company? Your assets are greater than your liabilities."

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    Why do we need to create our own legal fund?

    Since the U.S. Trustee did not appoint an equity committee the stockholders can not submit legal bills to the company to be paid. In this situation the only way to pay the lawyers is to have someone (stockholders) contribute funds to pay the lawyer.

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    Why won't the lawyer work for a percentage of the award?

    There is no cash award in the bankruptcy court. If the lawyer is successful the company will revise the plan and 64,000 individual stockholders will get something. But there is no single cash pay-out that the lawyer could share.

    In a class action lawsuit the lawyers will work for a percentage because there is a cash award if the case is won. At this point this is a bankruptcy case not a class action case.

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    What will happen to any money that is left over in the legal fund?

    I originally stated that extra money would be donated to some nationally known charity. I am currently thinking that if none of the money is spent because we did not raise enough money to even file an objection I will just refund the money to the original contributors. In any case something reasonable and responsible will be done with the funds and the disposition will be posted on the web site.

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    How can the stockholders lose everything? It is so unfair!

    The company management lacks the will to stand up to pressure from the bondholders. After all it appears that after the bankruptcy the bondholders will own the stock and therefore have control of the board and therefore be the new bosses of the company management. In addition, the bankruptcy laws have given substantial power to the creditor (bondholder) committee and no equity (stockholder) committee has even been appointed. The bondholders see a chance to take it all and they are trying to take it all.

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    As stockholders, why don't we just vote in a new board of directors?

    When a company goes into Chapter 11 it stops issuing normal financial reports and stops having stockholder meetings. Since there are no meetings there are no elections for directors. The directors cannot be voted out when there are no elections.

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    Should I buy or sell my WorldCom/MCI stock at this time?

    I cannot answer this question. First, I do not know what is going to happen so I do not know if it would be wise to buy or sell. Second, I am not a qualified financial consultant that can give advise on buy/sell questions. Third, I am not willing to make a prediction and risk being wrong.

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    I own 'MCI' stock, not 'WorldCom' stock, Won't I be O.K.?

    My understanding of the plan is that the current MCI stock will be worthless and there will be "new MCI" stock issued that will be given to the bondholders.

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    Where did you find this Lawyer? How do we know he won't just take our money and not really do anything?

    This lawyer was brought to me by another stockholder that did a search through the World Wide Web.

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    How do we know that Neal Nelson is not a crook? Maybe he is going to just take our money and not really do anything.

    Neal Nelson has been operating a small computer consulting business in the Chicago area since 1973. Information about his company can be found on the web site www.nealnelson.com

    Neal has organized stockholders groups on two prior occasions (Boston Chicken and Williams Communications). For over 30 years in business and in the two previous stockholder efforts Neal's behavior has been totally honest and above board. It is unlikely that in this case he has suddenly transformed into a crook.

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    Why doesn't congress do something about this outrage?

    Comment coming soon.

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    Why doesn't the SEC do something about this outrage?

    I have had a personal meeting with a representative from the SEC. I have concluded that the SEC is dominated by lawyers who think in terms like "Does this activity fall within the letter of the law?" rather than "Is this really necessary from a business perspective?" or "Is there some other option that would be better or more just?"

    Their attitude seems to be that if it's legal, it's not their problem. They will wait for congress to change the law.

    Note: On May 19, 2003 the SEC announced that as a result of a lawsuit that it had filed, a 500 million dollar fund would be set up by WorldCom to pay damaged parties (including stockholders). Maybe the new SEC chairman is making a difference.

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    Why doesn't the U.S. Trustee do something about this outrage?

    The charter for the U.S. Trustee program allows the trustee's office broad powers to intervene in bankruptcy matters. They can make motions and recommendations to the judge on any aspect of a bankruptcy case or reorganization plan. The Trustees generally have adopted a passive approach to their job. They rubber stamp the appointment of committees and then sit back and do little else during a bankruptcy case. Congress and the justice department gave them the authority to act, but the current staff members in the trustee program have generally decided that it is not necessary or appropriate to exercise that authority.

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    Why doesn't the judge do something about this outrage?

    It seems that U.S. court judges limit their actions to approving motions that are placed in front of them. They seem to be bound by precedent and do not seem to be inclined to issue rulings that make waves. Since the bondholders and company management have agreed to split the company up between them (leaving the stockholders with nothing), and the stockholders can not afford to hire lawyers because an equity committee was not appointed by the U.S. Trustee, the majority of the motions that are being presented to the judge support the bondholder/company management position. It seems unlikely that a U.S. judge, and particularly unlikely that one from the southern district of New York, would stand up and say "This deal stinks! Go back and work out something that is more fair to all interested parties."

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    What kind of committee is this?

    This is an informal or "ad hoc" committee of WorldCom/MCI stockholders. It is a "committee of the whole". There are no elected officers at this time. Several individuals have come forward and volunteered to help with specific tasks. A willingness to work will entitle one to be a member of the "executive committee".

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    Who is Neal Nelson? Why is he doing this?

    Neal Nelson is a WorldCom stockholder. He bought his shares about a year ago. His average share price is below a dollar a share.

    A few years ago he has lost a significant amount of money because a company "restructured" and it made him mad. Neal has been distressed by the recent actions of corporate management where stockholders are left with nothing after a "restructuring".

    Since he has both the skills and equipment to organize a stockholder group, via the world wide web, he decided to get involved. He is serving as an unpaid volunteer but he will probably benefit if the stockholders get a fair deal in the future.

    Neal is a computer consultant from the Chicago area. Neal has been running his own computer consulting business since 1973. His company's web site is at www.nealnelson.com

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    Does it cost any money to "join" the group.

    No. This is a strictly volunteer effort. All time and resources are donated. There are no charges or dues of any kind.

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    What do I have to do to join this group?

    On the main page of the web site there is an option "Stockholders can add their names to the email list by clicking here". This option displays a screen where a stockholder can enter various types of information. The email address is the only "required" field. After the stockholder has entered his/her information, he/she should click the "Process" button on the screen. This completes the registration process.

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    What use will be made of the information I enter when I join?

    The information is being maintained on a secure server in the offices of Neal Nelson & Associates. It will only be used to facilitate communication on stockholder matters. The email addresses will be used to send out notices of significant events. There will be no distribution or other use of the email list. All information supplied will be kept in the strictest confidence.

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    What is going on now? What happens next? How long will it take?

    Now that WorldCom is in Chapter 11 bankruptcy, there will be a number of hearings, reports and motions over a period of time. Eventually the company management will propose a reorganization "plan". This plan will include a way to pay off the debtors (banks, bondholders) and it will also specify what (if any) value will be left for the stockholders.

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    What is our next step?

    The Equity Holders Committee is the next and very important step. The U.S. Trustee in a bankruptcy case will not always appoint an equity holders committee. Without an Equity Holders Committee the stockholders (equity holders) have a very tough time affecting the final outcome of the bankruptcy process.

    Our group needs to convince the U.S. Trustee's office that an Equity Holders Committee makes sense in this case. If an equity holders committee is formed, it must then act quickly and effectively to get some modifications to the company proposed reorganization plan.

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    Is the stock worthless?

    Not yet. The current reorganization plan will make the stock worthless if it is approved in its current form. There might be changes to the plan before it is approved by the judge (several months from now). It is too soon to tell what will be the outcome.

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    Should I sell my stock? Should I hold my stock? Should I buy more stock?

    I cannot offer advice on this topic. Depending on the final "plan" that is approved by the judge the stock could have value or it could be worthless. I do not know what the future will bring.

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    What happens to the company when the bankruptcy process ends?

    The company plan will probably allow WorldCom to continue as a company in a very similar form after the bankruptcy process is complete. The major difference is that a month ago the company had substantial debt (mostly in bonds) and the company was "owned" by the current stockholders. The "new" WorldCom will probably have very little debt and the current debtors (bondholders mostly) will probably own most or all of the common stock for the company. The current stockholders may own nothing of value in the "new" company.

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    What about those class action lawsuits?

    A bankruptcy filing automatically puts all of the class action lawsuits on hold until the end of the bankruptcy process. Many (most) of the final reorganization plans that come out of a bankruptcy process will deal with such lawsuits as part of the total package.

    For example, the bankruptcy plan may allocate a fixed amount of money to settle any and all of the lawsuits pending. This amount could be zero so all of the lawsuits would just be dismissed.

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