Oil and gas development is capital intensive, so a lot of BP's value was in assets that could be sold for fixed value no matter how bad the compensation and fines got. After the spill BP had a book value of like 3 times the stock price, so they could liquidate, pay their entire capitalization value, and you'd have still made 100% return on your investment. That probably wouldn't work so well with a company like Coca-cola or Nike where the brand is a significant part of the company's value.

For awhile I worked at a vulture fund where we picked up stuff from distressed companies. Want to guess what percentage of companies got themselves there because of lawsuits? At least half.

G's analysis that the liquidation value of the company is positive (he doesn't appear to know the difference between book and liquidation value) is a completely nutty theory for buying stock of distressed companies. Bankruptcy destroys value at a ferocious clip and have the US govt step in and set up an environmental damage trust fund and the liquidation value that matters to you is the one 20 years down the road when everyone who can get a piece of that trust fund has taken their shot and the fund finally liquidates.

Virtually all big companies have lawsuits. If a stock is annihilated due to a lawsuit unless you really know what you are doing, you should stay away.

Accepting risk is what investing is all about. Obviously, some parties felt that BP's problems would be of short-term duration compared to it's longer term value.

Yes, you should never invest (at least, long-term) in a stock that's under a pending lawsuit. If they lose the lawsuit, the stock will slump, often by a lot. You can take risks in trading short-term, but if you're going to do that, you might as well trade another stock that performs similarly.

Ok i am a just wondering what made BP a good buy when bp had the oil spill? It was made cheap but what was the dangers of investing in a company which will have lots of lawsuits/settlements? obviously because the reaction made the price low , apart from cheapness how could it be of good investment qualities? I am hearing two sides of the story , one that it was cheap after the oil spill and investors shouldve went in to catch the stock but another saying the uncertainty that shrouded the stock. what is your opinion on this? I cant remember who said this but i remember reading that you should never invest into a lawsuit. Was bp a gamble or was it a stock that had a unforeseen circumstance which would eventually recover?

thanks