What happens when a company's stock goes down to ZERO?

[Kim&Chris]

Does it automatically mean they are out of business?

Just curious because.......... . Our stock is tumbling fast.

 

[CapeCodTenor]

Don't know, but I'd be interested in hearing the answer to this as well.

 

[c4a]

No. It means that your stock isn't worth the paper it is written on. However, the company can stay in business (operate in the red), close, or file bankruptcy. You do NOT want them to file bankruptcy!!! When companies do this, bills are paid first (rightly so)...then owners (stock holders). If nothing is left over...you get nothing. You are only out your investment.

The market, as you know, is fluctuating all over right now. So, several things can happen. The stock can continue to dip, it can hover, I seriously doubt it is going to go up. (Even if it was a company that is part of the bail-out).

What should you do? Depends. If the business is not filing bankruptcy or is not announcing that the may be filing & are a part of the bail out...I might hold on. There is a slim long-term possiblity that the company may recover.
Example: GM. There stock was valued at $0 last week, Wednesday it was up to $3 and change. (Part of that is people buying low hoping for a bail-out)

If the company is filing bankruptcy or has announced they may...I'd already dropped it.
Example: GM, again. If the auto industry is not included in the bail-out, GM has stated they will be forced to file bankruptcy. At that pt. , it won't matter how cheap you bought their stock...it is still losing money. Like I said earlier, a bankrupt company often times will not have money left over (after bills (including salaries, day to day operation expenses, and pensions) for the stock holders.

Need to get ahold of whoever is handling your portfolio, ASAP...and find out exactly what is going on with the company.

 

[Kim&Chris]

No. It means that your stock isn't worth the paper it is written on. However, the company can stay in business (operate in the red), close, or file bankruptcy. You do NOT want them to file bankruptcy!!! When companies do this, bills are paid first (rightly so)...then owners (stock holders). If nothing is left over...you get nothing. You are only out your investment.

The market, as you know, is fluctuating all over right now. So, several things can happen. The stock can continue to dip, it can hover, I seriously doubt it is going to go up. (Even if it was a company that is part of the bail-out).

What should you do? Depends. If the business is not filing bankruptcy or is not announcing that the may be filing & are a part of the bail out...I might hold on. There is a slim long-term possiblity that the company may recover.
Example: GM. There stock was valued at $0 last week, Wednesday it was up to $3 and change. (Part of that is people buying low hoping for a bail-out)

If the company is filing bankruptcy or has announced they may...I'd already dropped it.
Example: GM, again. If the auto industry is not included in the bail-out, GM has stated they will be forced to file bankruptcy. At that pt. , it won't matter how cheap you bought their stock...it is still losing money. Like I said earlier, a bankrupt company often times will not have money left over (after bills (including salaries, day to day operation expenses, and pensions) for the stock holders.

Need to get ahold of whoever is handling your portfolio, ASAP...and find out exactly what is going on with the company.

Thanks, but actually I was talking about my employer

 

[Quiksilvr]

Agreeing with previous poster. It basically means that the stock is "valueless". It doesn't mean the company will go out of business. It actually doesn't mean the company is worthless either. Ostensibly, the company has assets. However, the complete financial picture may show that the company is insolvent or that it is tanking. You can't really tell anything without looking at the financials.

And actually, it's economically debatable whether the stock of an operating company ever actually gets to "$0.00" without a bankruptcy or dissolution. Some would argue that there is always some value there even if it is only a fraction of a cent.

For publicly traded stocks, having a value that low usually means you're headed for being delisted from your exchange.

 

[blu3d3vil]

Buy!!!!

 

[c4a]

Thanks, but actually I was talking about my employer

So, you want the reality of what can happen? Straight up...this is going to hurt. And I am so sorry.

Honey, find another job...as of yesterday. It doesn't matter if your current job is/isn't union.

Many times, what happens is a company meeting will be held, paychecks issued...first to cash check get the money. The rest, well...checks have been known to bounce. Seen it happen several times.

When it hits zero/bankruptcy usually is filed. Outside suppliers will be paid first. They have the money to sue the company, & have a stronger contract with the company.( Especially in states, where the law is "employeed at will"...the company does not have to have a reason to let you go. )

If you stay with the company, best possibility is drawing unemployment.

I am so sorry. I wish I could give you better news.

 

[Kim&Chris]

Agreeing with previous poster. It basically means that the stock is "valueless". It doesn't mean the company will go out of business. It actually doesn't mean the company is worthless either. Ostensibly, the company has assets. However, the complete financial picture may show that the company is insolvent or that it is tanking. You can't really tell anything without looking at the financials.

And actually, it's economically debatable whether the stock of an operating company ever actually gets to "$0.00" without a bankruptcy or dissolution. Some would argue that there is always some value there even if it is only a fraction of a cent.

For publicly traded stocks, having a value that low usually means you're headed for being delisted from your exchange.

Thank you.

 

[c4a]

Now, if your company is part of the bail-out...you may have a job a little longer.

 

[c4a]

Please, tell me that you did not invest more than 20% of your 401k in your company's stock? That would be worse case scenerio.

If you did, get out your HR stuff-and double check to make sure there are no penalties to "transfer" those stocks into another company. If there isn't go for technology companies. Avoid any company that sells something to the general public. Their sales are going to be down, now & will continue to go down. That means less revenue in...stock if not already going down, will continue to do so. Look at Procter & Gamble, MicroSoft, World Fuel, Almost Family are all doing fine (some-World Fuel and Almost Family are going up).

It is better to buy 1 stock that is doing well at a slightly higher "bargain" price than to invest money in a lot of stocks in a "bomber"...when looking at the possiblity of job loss, especially. The 1 stock in a steady company will either hold price or go up. The bomber's will continue losing for a while.

 

[Enchanted_Mama]

Buy!!!!

I disagree - if you already work for this company, I wouldn't tie your portfolio to it as well.

 

[Andy B]

The share value does not mean that the company is operating without profit just that no one wants to buy the stock, this may well be because there are problems but you should speak to the management.

 

[mikehn]

When the stock value goes to zero, it means the stock is worthless, the company is usually out of cash and no ability to borrow money. Although not 'automatically out of business', without cash to operate a company is basically done. The company files bankruptcy, employees may or may not get paid, assets are liquidated, creditors file a claim to get paid. Thats basically it. A company cant operate without cash, period. Operating 'in the red' only relates to accounting.

 

[Loverly]

No. It means that your stock isn't worth the paper it is written on. However, the company can stay in business (operate in the red), close, or file bankruptcy. You do NOT want them to file bankruptcy!!! When companies do this, bills are paid first (rightly so)...then owners (stock holders). If nothing is left over...you get nothing. You are only out your investment.

.

Disagree. When our company filed, and then was bought out, that $$ was divided to EVERYONE who was owed money-there were about 300 of us. All bills, employees etc were treated equally. We each got about 20 % of what we were owed.

 

[AnnaS]

Does this also apply to banks? Our local bank's stock prices keep going down. It's below $3 (It was recently bought by a big Spainish bank - I don't think it will be finalized til Jan.) I know they are all FDIC insured up to $250,000. My bil keeps telling my mil to take her money out.

 

[mamacatnv]

My brother has worked for a company for several years now whose stock has hit $0 more than once and not just in recent months, this has been going on for several years. Sometimes the stock is worth a penny or 2. He is still employed.

 

[mikehn]

It is possible for a company to still operate with a stock price of zero, so long as it has cash on hand, can borrow cash, or can generate cash somehow. Because if the company didnt have any cash to pay your brother, he wouldnt be working there for free.