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They are very often wiped out!

Here’s an example about two companies:

Long-Term Capital Management (LTCM) was a hedge fund founded in 1994 by John Meriwether who was a former vice-chairman and head of bond trading at Salomon Brothers.
Long-Term Capital Management had developed complex mathematical models to take advantage of arbitrage opportunities on the bond market. Because of the enormous profit they made on the first years they had more money to invest than they knew how to invest. In other words they had too much money to use with their successful model. Because of the pressure to keep making the amount of money they did in the first years they took very risky positions outside their know-how and burned badly.

Victor Niederhoffer is a well known fund manager and a professor of finance in University of Berkley (1967-1972). After having an average annual return of 35% Victor Niederhoffer had made so much money that he gave most of it back to the investors but he took the 130 million dollars and invested it in Thai bank stocks after they had fallen heavily because of the Asian financial crisis. On October 27, 1997, losses resulting from this investment, combined with a 554 point (7.2%) single day decline in the Dow Jones Industrial Average (the second largest point decline to date in index history) forced Niederhoffer Investments to close its doors.

That’s what happens to companies who don’t make preservation of capital their primary aim - they lose their money.

The ideas from this post are derived from the book „The Winning Investment Habits of Warren Buffet & George Soros”.