We received a notice that a stock we invested a small sum in has
filed for bankrupsy. There is also a lawsuit filed against them for
fraudulent representation of company finances. What steps should our
club take?
Laurie Frederiksen on
Hi,
When a company files for bankruptcy, its shares are typically delisted from the major exchanges as it moves through the bankruptcy reorganization process. They are not worthless, but they may not be worth much.
Many companies eventually cancel their outstanding stock when the bankruptcy is finalized. That is the point when the shares become worthless and you can write them off, but this can take several years.
Until then, you'd own a stock with little value that would make your club record keeping a bit harder because you'd have to update its price manually.
If you want to keep things simple, you'll probably want to have your broker sell the shares you have ASAP so you can remove them from your records.
Laurie Frederiksen Invest with your friends! www.bivio.com
We received a notice that a stock we invested a small sum in has filed for bankrupsy. There is also a lawsuit filed against them for fraudulent representation of company finances. What steps should our club take?
Mike Jones on
Would selling these nearly worthless shares preclude claiming any benefit that may result from the lawsuit? Or would having owned the shares secure your rights?
Mike Jones
Wall$treet Wannabees
From: Laurie Frederiksen <laurie@bivio.biz> To: The Club Cafe
<club_cafe@bivio.com> Sent: Thursday, November 6, 2014 7:45 AM Subject: Re: [club_cafe] stock filing bankrupsy
Hi,
When a company files for bankruptcy, its shares are typically delisted from the major exchanges as it moves through the bankruptcy reorganization process. They are
not worthless, but they may not be worth much.
Many companies eventually cancel their outstanding stock when the bankruptcy is finalized. That is the point when the shares become worthless and you can write them off, but this can take several years.
Until then, you'd own a stock with little value that would make your club record keeping a bit harder because you'd have to update its price manually.
If you want to keep things simple, you'll probably want to have your broker sell the shares you have ASAP so you can remove them from your records.
Laurie Frederiksen Invest with your friends! www.bivio.com
We received a notice that a stock we invested a small sum in has filed for bankrupsy. There is also a lawsuit filed against them for fraudulent representation of company finances. What steps should our club take?
Laurie Frederiksen on
A bankruptcy filing is not a lawsuit. Generally lawsuit settlements apply to shareholders of record on certain dates. In that case, if you own the shares on those dates you'd be entitled to a portion even if you subsequently sell them.
If you sell your shares before a bankruptcy reorganization is finalized, you will probably not be entitled to anything that comes out of it.
If you know enough about a company to be able to determine whether there is any chance you might get something out of the bankruptcy reorganization, you should probably hang on to your shares.
But you are only one in a list of many. The chances you will get something might be pretty slim. And in the meantime, you'll have a pink sheet stock complicating your club record keeping and making it difficult to get a good valuation.
Laurie Frederiksen Invest with your friends! www.bivio.com
On Thu, Nov 6, 2014 at 12:23 PM, Mike Jones via bivio.com wrote:
Would selling these nearly worthless shares preclude claiming any benefit that may result from the lawsuit? Or would having owned the shares secure your rights?