If a public company goes bankrupt what happens to the stock?

Question

What happens if another company buys it out?
The company files bankruptcy?

Answer 1

If another company buys it out "before" it goes bankrupt then the new company must buy out the shares from the existing shareholders.

As for bankruptcy, the protections under bankruptcy protect the company from is debt holders and stock holders. So the shares become worthless. This happend to KMart. They filed Bankruptcy and the shareholder got nothing. The shares became worthless. Then Eddie Lampert bought up the company out of Bankruptcy and brought it public again. The original shareholders got NOTHING! It all went to Eddie. The stock is now SHLD which has done GREAT but the initial KMart shareholders go no piece of this action!

Answer 2

The person before gave an excellent answer. To add my 2 cents in, when a company files for bankruptcy, it's assets get liquidated and that money is used to pay some of the debtors esp. those that offered the company secured loans with company assets as collateral. At the end of it all, the stock holders usually end up with no cash and cancelled stocks.

Answer 3

MCI was just such a company. Bought out by Verizon Communications. Holders of MCI bonds got some money back, holders of MCI stock, got their stock cancelled and a wave goodby. NO money. Thats what happens most of the time. You will see people still buying stock of companies going through bankrupcy in the hope the stock is not cancelled and goes up (as Delta is now trying to do) but it is a risky gamble, not an investment.

Answer 4

I'm not sure about a company buyout but if a company goes bankrupt, they have to pay all their creditors, then the preferred stock holders, then the common stock holders get whatever is left over. Most likely nothing.

Answer 5

No, interior the case of GM. The long answer relies upon the character of the financial ruin. interior the large photograph, bankruptcies tend to fall into one in each and every of two categories: reorganization and asset seizure. In the two situations, the hot business enterprise that emerges from financial ruin is reorganized into something "new," although, reorganizations tend to leave the winning business enterprise extra-or-much less the comparable. In those situations, the user-friendly inventory holder can get something of the hot business enterprise after financial ruin. on the different hand, asset seizures like the GM financial ruin contain a elementary reordering of the possession and business enterprise of the business enterprise throughout the time of the financial ruin technique, in many circumstances on the hand of familiar lenders. a number of those bankruptcies tend to leave the user-friendly stockholder out interior the chilly with no longer something.

Answer 6

Shareholders in the old company will typically get shares in the new when bought out. The rate of exchange depends on how the deal is structured, but you may get, for example, 0.4 shares in the new company for wach share you have in the old.

For bankrupcy, the shares will typically lose value, but are still tradable. Should the company not emerge successfully from bankrupcy, the shares will invariably lose all value on their own.