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The term "zombie" refers to a company that is insolvent or facing bankruptcy, but is still operating as it awaits the subsequent merger or foreclosure. A zombie, in the traditionally haunting sense, is a living corpse; a zombie is associated with "the living dead." A zombie company is considered to be in a figurative state of "living but dead" because it is not expected to continue operating, despite its ability to do so now. A zombie company may be in or close to filing for bankruptcy - Chapter 11 - which allows a company to continue operating while it restructures its debt. A zombie company is typically considered a risky investment, so investors may choose to avoid a corporate zombie just as they would avoid a supernatural zombie. Of course, as with many investments, the higher the risk, the higher the potential payoff. |
