I recently had a student who called, and told me they had just purchased thousands of shares of a company who had recently declared bankruptcy. I think it is important for us to talk about what may or may not happen.
With various companies going bankrupt, many people are asking what will happen to shares of those companies who are going bankrupt. There are a few different things that can happen to the shares.
Most the time the stock’s price will drop severely, and loose value. The value is usually nearly 90% of the original stock price. Sometimes the stock will lose all value.
The stock may also be delisted. A delisting can occur if the company fails to engage in activates that are not for the public interest, their price falls below a certain stock price, or other reasons contrary to the market.
The stock could also be relisted as a penny stock. This means the stock is traded less than $5.00, and is a very volatile stock. They are very risky investments, and most experts warn against stocks listed as penny stocks. We could have three to five pages about the speculative nature of penny stocks but the important thing is to be careful with such stocks.
If you purchase a stock listed as a penny stocks, you need to fill out additional forms with your broker letting them know you understand the risks that are involved.
These are a couple things which may happen to the shares of companies when the go bankrupt. It is difficult to determine what companies will bounce back and what companies will go under.
It is important to be careful on what is going on, and to follow what you have learned from your coaches.
Micah Richards
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