what happends to a companys stock when it files for bankruptcy?

Question

when a company files for bankruptcy, what does that mean for its common stock? will the company fold and remove itself from the market or is it a temporary status where the company will come back and, ideally, become profitable again?

Answer 1

either one could happen

in bankruptcy, the court takes charge. if the management is able to present a plan that leaves some value for the existing shareholders, they will probably be permitted to proceed with it and then the stockholders may have something after the wreck is over.

the other case is that there is nothing left for the shareholders and then all the existing shares are wiped out and their owners get nothing. in this case, usually the unsecured creditors exchange their claims for shares in the reformed company and then they appoint the new management.


:-)

Answer 2

Chapter 13 bankruptcy is reorganization. The company first pays the creditors, then the bondholders and then the stock holders. Usually by the time it gets to the stockholders, there is nothing left and the stock is deemed worthless. During this reorganization the company gets new financing and sells new stock, but that is to new stockholders. Usually the banks and investment companies that put up the new financing get the new stock.

Answer 3

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RE What happends to a companys stock when it files for bankruptcy?

when a company files for bankruptcy, what does that mean for its common stock? will the company fold and remove itself from the market or is it a temporary status where the company ...show more

Answer 4

When a company files bankruptcy they settle their debts with their creditors. There is a hierarchy in the order of creditors to be paid. The common stockholders end up witht whats left. Many times there isnt anything left. There is no equity. So the stock is eventually canceled and worthless. They may raise more money and issue new stock but the holders of the old stock have lost all their investment.

Answer 5

In the typical case, the stock becomes worthless or near worthless as the debtholders become the new stockholders and the old stockholders receive either zero or pennies per share.

Answer 6

i latterly bought my shares of siri for .12.. in the event that they dont do a r/s (opposite split) or undertaking extra shares to conceal their debt, they are going to maximum in all likelihood record. despite if financial disaster isn't unavoidably a bad element (reckoning on what financial disaster they record), interior the eyes of the person-friendly shareholder its a bad sign and that they panic and could nicely for this reason an extremely speedy drop in pps.

Answer 7

Bankruptcy = worthless stock

Even if they reorganize and "come back", they are not the same company, technically.

This may be your only solace:

http://en.wikipedia.org/wiki/Scripophily