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Aug
Aug
Answerer asked:
If I have stock in company that goes through bankruptsy, what happens to the stock owned by shareholders?
If I have stock in company that goes through bankruptsy, what happens to the stock owned by shareholders?
I’m not talking about an Enron-style collapse, I mean a company that goes through bankruptcy, but survives and hopefully will eventually recover.
How To Survive Bankruptcy
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Category : Corporations
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Well bankruptcy will cause the share prices to drop significantly. You shouldn’t lose your shares, but it’s not guaranteed that you’ll own anything if the company’s debt is really bad.
How To Survive Bankruptcy
Generally shareholders lose everything. If the company re-organizes then the bond holders are given shares in the new company.
How To Survive Bankruptcy
Firstly a company cant go bankrupt.
It goes into receivership or liquidation.
Receivership is when it is managed by an external party (The Receiver) who’s main job is to try and get the buisness back on its feet. If he succeeds the shareholders will be safe ( as will all the other stakeholders)
If he fails and the company goes into liquidation the shareholders will receive a proportion (sometimes 100% of their original stake) after EVERYONE else has been paid out.
Usually in liquidations there isnt much left for the shareholders so in the worst case scenario you wouldnt get anything
How To Survive Bankruptcy
Yes.
When K-Mart went bankrupt, all the existing stock shares became worthless, and new stock was issued.
But the real handing of a corporate bankruptcy is handled in the Bankruptcy Court, and this may or may not be true in all cases. Corporate bankrptcy is complex.