Stock Experts: What typically happens to a stock after declaring bankruptcy?

[Ns1]

Let's take a hypothetical example here

Say you own 100 shares of a major airline at trading at 20

The next day, unknown to everybody, they declare chapter 11

What happens to your stock then?

Now fast forward 3 years, they've 'emerged' from their bankruptcy and are pulling in millions per year in income.


Does the stock go from 20, to pennies, back to whatever? or....

 

[FoBoT]

common stock is the last in line, in most cases your stock is nulled and you get nothing, but it depends

http://www.sec.gov/investor/pubs/bankrupt.htm

A company's securities may continue to trade even after the company has filed for bankruptcy under Chapter 11. In most instances, companies that file under Chapter 11 of the Bankruptcy Code are generally unable to meet the listing standards to continue to trade on Nasdaq or the New York Stock Exchange. However, even when a company is delisted from one of these major stock exchanges, their shares may continue to trade on either the OTCBB or the Pink Sheets. There is no federal law that prohibits trading of securities of companies in bankruptcy.

Note: Investors should be cautious when buying common stock of companies in Chapter 11 bankruptcy. It is extremely risky and is likely to lead to financial loss. Although a company may emerge from bankruptcy as a viable entity, generally, the creditors and the bondholders become the new owners of the shares. In most instances, the company's plan of reorganization will cancel the existing equity shares. This happens in bankruptcy cases because secured and unsecured creditors are paid from the company's assets before common stockholders. And in situations where shareholders do participate in the plan, their shares are usually subject to substantial dilution.

 

[Ns1]

Originally posted by: FoBoT
common stock is the last in line, in most cases your stock is nulled and you get nothing, but it depends

http://www.sec.gov/investor/pubs/bankrupt.htm

A company's securities may continue to trade even after the company has filed for bankruptcy under Chapter 11. In most instances, companies that file under Chapter 11 of the Bankruptcy Code are generally unable to meet the listing standards to continue to trade on Nasdaq or the New York Stock Exchange. However, even when a company is delisted from one of these major stock exchanges, their shares may continue to trade on either the OTCBB or the Pink Sheets. There is no federal law that prohibits trading of securities of companies in bankruptcy.

Note: Investors should be cautious when buying common stock of companies in Chapter 11 bankruptcy. It is extremely risky and is likely to lead to financial loss. Although a company may emerge from bankruptcy as a viable entity, generally, the creditors and the bondholders become the new owners of the shares. In most instances, the company's plan of reorganization will cancel the existing equity shares. This happens in bankruptcy cases because secured and unsecured creditors are paid from the company's assets before common stockholders. And in situations where shareholders do participate in the plan, their shares are usually subject to substantial dilution.

Ah very good. Perfect. Thanks

 

[SLU MD]

the shares become worthless. Equity holders (stock) are the first ones to take the hit in a bankruptcy.

 

[SSSnail]

Oh, you mean Delta?

They don't have the same ticker, they're not the same stocks 😉.