During his “Eureka Moment” segment, Jim Cramer told viewers of his “Mad Money” TV show that BP plc (ADR)(NYSE:BP) is not too large to fail. In fact, he thinks its a real possibility that the Gulf disaster could could easily swallow up the entire company. “Because of the potential for a near infinite number of claims from the Gulf of Mexico oil spill,’ Cramer said, “bankruptcy is very much on the table for BP.”
Cramer said the BP oil disaster should not be compared to the Exxon Valdez spill, but rather to the asbestos industry, which has completely wiped out due to the large number of claims it was hit with.”It’’s magical thinking to believe the company’s cash flow of around $7 billion a quarter is enough to get them through the disaster,” he said. Cramer said this would be especially true if a big storm blows through the Gulf of Mexico.
“if we get indictments,” he said, “the claims will overwhelm the company, and it will be in BP’s best interest to file bankruptcy in order to manage the process.”
Cramer explained that lots of people though the asbestos industry would be safe despite the endless denials. “But one by one, the manufacturers, the distributors, the installers, and eventually everyone who ever came in contact with the stuff, even tangentially, disappeared,” he said.
“Its not on the top of anyone’s mind that this could happen because BP is a huge company with lots of resources,” Cramer said. “But so were all of the companies that made asbestos.”
Cramer told viewers BP’s stock is uninvestable and dangerous, even at its current depressed prices.