Expert: Tad Borek - 11/20/2008

Question
What happens to my GM stock if they file bankruptcy?

Answer
Michael, each bankruptcy is different but in the typical Chapter 11 reorganization (which is more common for a large company in GM's position than a Chapter 7 liquidation) the original shareholders' stock is canceled, and they get nothing. Meaning, the stock is worthless. New stock is created, and may trade on the stock exchange under the same name, but it is given to the original creditors of the company, as well as those contributing capital as part of the restructuring. It's not the same stock as the shares people held before the bankruptcy.

Not all bankruptcies go this way, but it's extremely rare for shareholders to get anything. I can only think of a couple of times they did as part of a large company bankruptcy, in the two decades or so that I've been following the stock market.

-Tad