What happens to the stocks of a bankrupt company if the company is bought?

Nishant: What happens to the stocks of a bankrupt company if the company is bought by some other company?
What happens to the stocks of a bankrupt company if the company is bought by some other company.

I am plaaning to buy stocks of Bearing point. The company is bankrupt now and selling its operations across the globe. What will happen to my stocks if I buy them?

Answers and Views:

Answer by Steve D
Only if a company comes in and offers to buy the company as a whole will you make money through that sale. For example, IBM recently offered to buy Sun Micro for $ 9.40 per share – if the offer had been accepted, all shareholders would have turned in their Sun Micro shares for that amount. However, no one out there has offered to buy BearingPoint, so BearingPoint is selling off pieces of its businesses to satisfy creditors and hopes to emerge from bankruptcy after reorganization.

Whether your stocks will be worthless or go up will depend on how well BearingPoint can reorganize and run their business after emerging from bankruptcy.

Answer by gosh137
Most of the time, the current shares will go to $ 0 value and be cancelled. If the company reorganizes it usually will issue new shares. So don’t waste your money on the current shares. Buy stock in a company that is making a profit.

Answer by Michael T
A company files for bankruptcy because its debts exceed its assets. There is a hierarchy for repaying the debts with secured loans at the top and common shares at the bottom.

A bankruptcy court will discharge debts to either allow the company to reorganize, to be sold to another company, or pieces to be sold off. Normally since common shares are the least likely to be repaid after bankruptcy, common shares are usually useless.