Expert: Tad Borek - 11/21/2008

Question
What happens to the stock that one owns if a company goes into bankruptcy? Example GM Ford

Answer
Don, it's like clockwork - I always get bankruptcy questions here when the possible bankruptcy of a big company is in the news.

Every bankruptcy proceeding is different, but stock in a company that undergoes a "chapter 11" reorganization is almost always canceled, meaning it's worthless. New stock is issued and may trade on the exchange under the same name, but it's actually different stock from the shares that pre-bankruptcy shareholders own. Shares in a bankrupt company will have a "Q" added onto their ticker, which is a good warning sign to a potential purchaser of the stock.

There are some bankruptcies where original stockholders got some of the new shares, but it's extremely unusual. I can only think of a couple examples over the two decades I've been following the stock market.

-Tad