Stock question

[Kenazo]

So I was looking through some of the stocks I had in my quote list from a year or two ago, and I came across this one: MWA.TO. It is in bankruptcy protection right now, and it seems to be bouncing between $0.02 and $0.025 every day. Why would a stock so regularily fluctuate in price? If someone wanted to risk a little could they not make some decent money by putting a buy @ 0.02, and a limit at $0.025?

 

[MacBaine]

Originally posted by: Kenazo
So I was looking through some of the stocks I had in my quote list from a year or two ago, and I came across this one: MWA.TO. It is in bankruptcy protection right now, and it seems to be bouncing between $0.02 and $0.025 every day. Why would a stock so regularily fluctuate in price? If someone wanted to risk a little could they not make some decent money by putting a buy @ 0.02, and a limit at $0.025?

Usually for stocks that cheap, you'd have to buy a *sh!tload* to make any money after the brokerage fees charged for such worthless stocks.

 

[edprush]

that fluctuation is nothing more than the difference in the bid and the ask price. you will never beat a spread like that.

 

[techfuzz]

I didn't think companies under bankruptcy protection where allowed to exchange shares on the open market? I always thought the SEC (or in this case, I think, Canada's version of the SEC) doesn't allow that.

techfuzz

 

[Hector13]

Originally posted by: techfuzz
I didn't think companies under bankruptcy protection where allowed to exchange shares on the open market? I always thought the SEC (or in this case, I think, Canada's version of the SEC) doesn't allow that.

techfuzz

no, it is fine for them to trade. In the US, most bankrupt public companies end up on the "pink sheets" (ie, they become penny stocks like Enron and whatnot).

 

[Hector13]

Originally posted by: edprush
that fluctuation is nothing more than the difference in the bid and the ask price. you will never beat a spread like that.

there is nothing stopping you from placing buy limits at the bid and sell limits and the ask. The market maker can't trade ahead of you (without, of course, improving the spread). Of course, just because you see the stock moving back and forth between .02 and .025 recently, it doesn't mean it will continue to do so. In this case, the spread happens to be the minimum tick size as well.

 

[techfuzz]

Originally posted by: Hector13
no, it is fine for them to trade. In the US, most bankrupt public companies end up on the "pink sheets" (ie, they become penny stocks like Enron and whatnot).

I recall when Enron went under, the SEC halted trading of their stock to prevent people from flooding the market trying to sell their shares. It still doesn't make too much sense, if you're company is bankrupt, the shares are worthless, why bother trading them?

techfuzz

 

[Hector13]

Originally posted by: techfuzz

Originally posted by: Hector13
no, it is fine for them to trade. In the US, most bankrupt public companies end up on the "pink sheets" (ie, they become penny stocks like Enron and whatnot).

I recall when Enron went under, the SEC halted trading of their stock to prevent people from flooding the market trying to sell their shares. It still doesn't make too much sense, if you're company is bankrupt, the shares are worthless, why bother trading them?

techfuzz

while bankrupt companies can have their trading temporarily halted on the NYSE or NASDAQ, they do in fact trade. Here is enron: ENRNQ.

Also, bankrupt companies can come out of bankruptcy (I think worldcom is doing so soon), so the shares can definitely be worth something to someon. Just cause a company files for chapter 7 or 11, doesn't mean it is worthless.