If the association is bankrupt, because is there still worth as well as they still get traded ?
Has there ever been the company, where land upon to the equity essentially valid to be the essential conjecture ? I can’t consider of any, as customarily the down payment holders have been propitious to even get behind to even, most reduction shareholders.
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Bankruptcy is a legal preceding and because a company files Chapter 11, there are no laws to cease the stock from trading at that point.
If the company ends up in Chapter 7 (liquidation) when all matters are complete by the party’s to the action, with a stoke of a pen and the whacking of a judges hammer, a stock can then cease trading.
Stocks of BK’d companies typically lose a significant part of their value which can vary, but I have seen 40-90%+ immediate drops.
By allowing the stock to trade, even with nominal value, it allows people to exit the security.
There are lots of people who have no clue how bankruptcy’s work, and they go in and bid the stock up. Enough of them can move the stock for a short time. Short covering can also push the stock up and confuse people making them think that the stock has value, when it really has little to none.
The reason why bondholders tend to get a better deal than stock holders is due to the laws on the classes of investment in the priority of a bankruptcy.
Bondholders are debt owners/ creditors
Stockholders are equity investors.
If there is no more money (equity) stocks can be worthless.
Bondholders usually end up getting a fraction of what they invested. If they could be paid off, then the company would not likely need to file for bankruptcy.
They are traded before the company’s bankruptcy is finalized. It’s usually still listed as a penny stock at about 1 cent but it’s not traded.