Stock hits zero?

We own a stock that is sinking fast down to $5.25 from a high of $16.00 We are going to ride it out but the question is what happens when a stock hits zero? Is the company forced into bankruptcy? Is the stock then deemed worthless?

Update:

They are looking into selling the company,

it is a restaurant with over 100 locations

9 Answers

Relevance
  • 1 decade ago
    Favorite Answer

    Sorry to hear that.

    A stock won't hit zero unless it's bankrupt, and sometimes even bankrupt companies will have their stock sell for slightly above zero. See ticker SCOX for a recent example.

    But bankruptcy often does mean that the stock is eventually cancelled and worthless. Selling at $0.01 is actually less trouble (in terms of preparing your taxes and taking the capital loss) then waiting for $0.00.

    But I am not recommending you ride it all the way down. You may be making one of two mental errors: (A) It's so far down, how much lower can it go? The answer is of course zero! (B) But I've already lost $10.75/share, what's another $5.25? The answer is, the stock doesn't know you paid $16 for it. The only thing that matter now is whether it's worth more than $5.25 or less. Would you buy it now at $5.25? If not, sell and have done with it.

  • trader
    Lv 4
    1 decade ago

    I am no expert on this matter.

    It all depends on the bankruptcy. When it happens, the stock usually becomes worthless. You can claim your losses on your taxes. Some companies, when/if they come back out of bankruptcy, issue new stock. Your old stock is worthless. Based off my previous experience, I would admit I was wrong, swallow my pride and sell the stock to retain what is left of its value. Ask you self, would you buy this stock today? If not, I would sell. Good luck on your decision.

    Source(s): School of hard knocks. Prior to learning technical analysis, I held onto a stock that was sinking fast. Kept hoping, wishing, somehow thinking I knew it would start back up. Let my investment become worthless. Now I ask myself, WHY?
  • Anonymous
    1 decade ago

    What is the companies assets worth? do you know that? A guy like Buffett or Icahn may step in and buy it up if it is a strong brand, so look at that angle before you sell and also consider what the ride down and back up could be if a new buyer comes in. If it is a no name and all the executives are jumping ship you need to check it out close.

  • 1 decade ago

    A stock is worth whatever someone is willing to pay for it. If nobody will pay anything, it's worthless. But if you ride it that far, hang on to it, or at least the records from your purchase. It may come back, or get bought out by another company, or you may be able to use the loss to offset capital gains on your taxes (if you're in the US)

  • How do you think about the answers? You can sign in to vote the answer.
  • 1 decade ago

    The stock will not hit zero unless it does go into bankruptcy and there it will depend on whether it is protection or liquidation.

    A stockholder wouldhave an interest in any of the proceeds that come from a liquidation after paying all secured and all un-secured creditors and any preferred stockholders (if any).

    I hope that this helps.

  • 1 decade ago

    I AM NOT A STOCK BROKER. OR A FINANCIAL CONSULTANT.

    Chances are, before the stock reaches zero, it will be assigned a new symbol and be placed on “the pink sheet”. If you need any further details or info, you should contact your broker.

    Thank you for asking your question. I enjoyed taking the time to answer it. You did a great job - not only for your information, but for every other person interested in reading my answer. Thanks to everyone for reading my answer.

    VTY,

    Ron Berue

    Yes, that is my real last name

    Source(s): Trading for over a year.
  • 1 decade ago

    -depends -you better sell it unless another company buys it out

  • Anonymous
    1 decade ago

    Why wait?

    Sell now.

  • Anonymous
    1 decade ago

    good time to buy, they won't go any lower.

Still have questions? Get your answers by asking now.