What Happens to the Stocks of Companies that are in the Stock Exchange and Fail?
Some of the listed companies may go bankrupt or go into liquidation over time. What happens to the company's stock in this case? What should stockholders do? You can find the answers to these questions in this article.
Shares of a company that has gone bankrupt or liquidated on the stock exchange are usually removed from the market in which it is traded. In other words, stocks become untradable on the stock market. In this case, stockholders have two options:
- Holding stocks: Stockholders can wait for the outcome of the company's bankruptcy or liquidation process. If the company has debts that cannot be paid, stockholders line up after creditors. In other words, after the company's assets are sold and its debts are paid, the remaining money is shared among the stockholders. However, in this case, stockholders may receive little or no money. Also, this process can be long and tedious.
- Disposing of stocks: Shareholders can dispose of stocks in other ways, even if they are not listed on the stock exchange. For example, it is possible to sell stocks to another investor or company. However, in this case, the value of the shares will be very low. Because buyers may not want to risk bankruptcy or liquidation. It can also be difficult to find an intermediary to sell stocks this way.
As a result, stocks of companies that went bust often lose value and become untradable. In this case, stockholders can try to mitigate their losses by holding or disposing of the stock. However, these options also have some risks and challenges. For this reason, it is important to analyze the financial situation and future expectations of companies when investing in the stock market.