Sell Your Bankrupt Stock To Clearance Wholesale
We have been purchasing bankrupt stock for over 30 years now and we understand all the ins and outs.
We also have a large amount of bankrupt stock for sale at really low prices. We welcome you to pop over and view all our stock at your leisure.
Please give us a call if you are interested in buying or selling bankrupt stock.
What Is Bankrupt Stock & Bankruptcy?
Bankrupt stock is owned by shareholders in publicly traded companies who file for legal protection from their creditors in a court of law. A judge then determines the disposition of the company's assets. Most are liquidated and sold for cash to pay off the company's debtors, and often a reorganisation plan is developed to manage the finances of the company so that it may continue operations.
There is a standard order the court will determine to repay the outstanding debt: the government financial institutions (banks and other lenders who the company has established a line of credit with), other creditors (suppliers, utility companies, etc.), bondholders, preferred shareholders (this is a class of stock that carries certain privileges, such as a dividend payment, that is not available to the holders of common stock) and common shareholders.
The shareholders see the price of their stock significantly reduced, in some cases, worth only pennies on the dollar of its original purchase price. Shareholders are likely to be included in the distribution of monies obtained through the liquidation of the company's assets, but for only a fraction of the value of the stock price.
Who Owns Bankrupt Stock?
The shareholders of a bankrupt company can be the executives of the company, those who have a stock option plan, employees, and those who have purchased the stock in a publicly traded exchange. One of the problems with purchasing is that there are requirements for the company to meet to continue to be listed on the major stock exchanges. Often bankrupt companies can no longer meet these requirements, so their stock must be found on the OTCBB (Over the Counter Bulletin Board) or what are known as Pink Sheets.
What Are The Risks?
Investors who are willing to take measured risks in troubled markets such as real estate, view the purchase as a possibility to profit from an economic downturn cycle, predicting that the industry, and the company, will return to profitability. Others purchase the stock in hopes of buying stock lots for pennies in the pound and making a quick profit if the company is released from bankruptcy by the courts and operates at full capacity.
The downside risks are obvious. An investment in the stock of a bankrupt company can have the investor holding worthless pieces of paper. This is the most likely occurrence of a bankrupt company. A bankrupt company's stock can be held for the long-term, preventing important capital from being invested in more profitable endeavours.
A common occurrence is that the company that has declared bankruptcy will cancel the existing common stock in order to issue new common stock. One example of this is when the major retailer, Kmart, filed for bankruptcy in 2002. The company later returned to profitability and in doing so cancelled the stock of the pre-bankruptcy holders and issued new stock – much of it to its creditors, not the common stockholders.
One of the key factors in determining the degree of risk in deciding to purchase a bankrupt stock is the number of active traders participating in the stock. The greater the number of traders, the greater the likelihood that there is more than an average potential for the stock to return a profit.
However, there is a strategical side to owning bankrupt stocks – tax considerations. The loss encountered can be used to offset large profits on other portfolio investments.
How Do Bankrupt Stocks Exist At All?
It seems that if the value of a company is zero upon filing for bankruptcy, the actual value of its stock should also be zero. This is true of the value the day the company declares bankruptcy, but there are speculators who will purchase the stock the next day, for as low as a penny. Another reason is that there still may be some residual value in the common stock even after the declaration, thus making it not entirely speculative, though cases in which this has actually occurred are rare.
What Is The Potential Upside?
There are cases where companies that have filed for bankruptcy have turned their business around and returned to profitability. Not very many years ago, the world's largest automobile manufacturer, General Motors (GM) filed for bankruptcy.
Where Can I Get Help?
If you would like more information about bankruptcy please visit Step Change, they offer superb advice, help and support.