: Investors with hybrid equity-debt holdings.
: Delisted shares migrate to over-the-counter (OTC) markets, such as the OTC Bulletin Board or Pink Sheets.
The type of filing determines the fate of the company and its shares: buying stock in bankrupt companies
Bankruptcy courts follow an "absolute priority rule" when distributing remaining assets. Common stockholders are at the bottom of this hierarchy: : Banks or lenders with collateral. Unsecured Creditors : Bondholders, suppliers, and employees.
Buying stock in companies that have filed for bankruptcy is a high-risk strategy that often results in a total loss of investment. While there is no federal law prohibiting the trading of these securities, the legal priority of claims usually leaves common shareholders with little to nothing. : Investors with hybrid equity-debt holdings
: Usually receive nothing unless all higher-tier creditors are paid in full. Chapter 7 vs. Chapter 11
: Some brokerages, such as Fidelity or Public , may restrict trading in these stocks or require special permissions due to volatility and low liquidity. The "Waterfall" of Payouts Common stockholders are at the bottom of this
: Tickers for bankrupt companies often have a "Q" appended to the end (e.g., "WXYZQ") to signal the bankruptcy status.