Anyone know how pink stocks work (bankrupt)

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cheese9988

cheese9988

Senior Member
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Lets say I bought 500 shares of some Delphi stock for 0.125 a peice. What happens when they emerge from being bankrupt? Do I actually get a gain when the price shoots up?
 
I don't see why either. But...right now is 0.125 so...

If I bought $1000 of it I would have 8000 shares. If it went up to say $30 a share I would have $240,000 from that $1000 I put in. Just seems a little too easy.
 
That sounds kind of like penny stocks...which that seems to be. If they pull out of bankruptcy and were to go up to $30 a share...wooo...you would be in the money and then some my friend. Best of luck to you.
 
captainobviouslb4.jpg
 
"It's very unlikely that a company will come out of bankruptcy without canceling its shares, especially if they have filed a reorganization plan saying that's what they intend to do," said John Nestor, director of public affairs at the Securities and Exchange Commission.
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Why shares of bankrupt companies usually go bad - MarketWatch

Delta shares now trade at about $1.02 a share, down from $1.15 at the start of the month, with up to as many as 14 million shares trading hands on a single day this year.
They could amount to nothing if its bankruptcy reorganization plan, filed with the court in mid-December, is approved. Its plan says "current holders of Delta stock will receive no distribution of new Delta stock" and their securities will be canceled when the plan is complete.
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Q:I am considering purchasing MCI-World Com shares even though the company might file bankruptcy. I'm willing to hold on to the shares for five to seven years. If I purchased the shares now what will happen with them if the company declares bankruptcy. Will the shares become null and void? Also, if a company purchases a bankrupt MCI-World Com could the shares regain value?

A: If the company goes bankrupt, the shares are worthless. Someone may buy the bonds and make money, but not with the common shares. This is not "cheap" stock. This is probably worthless stock. It's as long a shot as the lotto.
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Stock from bankrupt company worthless :: CHICAGO SUN-TIMES :: Savage Q & A
 
Common targets of manipulation and fraud.
And the opportunities for fraud come from both traders and companies. Since the share prices of these stocks are so low, often 30 cents or less, a single investor is able to buy or sell a large number of shares and have a big influence on the stock. Certainly, this can also happen with listed shares. But it's much easier for more investors to do this when share prices are low.

USATODAY.com - Investor beware: Pink Sheets, Bulletin Board often too risky
 
their bankrupcy plan as of nov 07?
The Plan provides for a recovery through a plan distribution of reorganized Delphi common stock and cash amounting to the principal amount of the claim plus accrued interest at a negotiated plan value for general unsecured creditors, and agreed upon distributions to other classes of creditors and interests. GM will receive a $2.7 billion cash distribution in satisfaction of certain of its claims against Delphi. As part of the settlement of the multidistrict ERISA and securities litigation, distributions will be made under three plan classes using plan currency in the same form, ratio, and treatment as what will be used to satisfy the holders of general unsecured claims. Allowed claims and interests for these three plan classes total $24.5 million for the ERISA plan class and a total of $204 million for the debt securities class and the common stock securities class. Holders of existing Delphi common stock will receive a distribution of shares of reorganized Delphi, five-year warrants exercisable to purchase shares of reorganized Delphi, and transferable and non-transferable subscription rights to purchase shares of reorganized Delphi.
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DPHIQ Delphi Corp Question on Stock in this Co. - Investing Minds::Forum - View Topic
 
That makes more sense.

Someone keeps insisting I buy the stock. But if this were true, then everybody could do the same thing, I wouldn't think there would be enough money to distribute.

From other reading it looks like they would probably just open another ticker symbol.
 
$204 million for the debt securities class and the common stock securities class.
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i don't know how many outstanding shares they had but this $204Mil probably equals .05 cents cash per stock

the redistribution of stocks could be 200 old stocks for one new one

i'd stick with the experts and avoid the stock
 
i think you mean pink "shares". they are stocks under $5 that aren't listed on the nasdaq.

they are high risk, high reward. all too often they don't move or they go bankrupt. if you really want to gain more money with more advantage and less investment, look into stock options. you will buy or sell a "right" to the stock and make money off of that without actually owning the stock.
 
i would not suggest options unless you are an exp. trader/investor. first of all not the average joe can be approved for option trading unless you are talking about writing a covered call.
 
If you believe a company will go bankrupt, talk to a broker, and sell the stocks short.

Instead of the buy low, sell high philosophy, selling stocks short is sell high, buy low philosophy. You sell someone else's, who has bought on margin, shares when the stock is priced high and then you're obligated to return the shares eventually. The point of this is that you buy back in when the stock is at its lowest. The best thing that could happen for a short seller is bankruptcy.

You sell $10,000 worth of shares and the company goes bankrupt, those shares are worth $0 now. Congratulations, you just made a $10,000 profit.

The difference between selling short, and long term holding and selling is; the risk of selling short is infinite (the stock price could climb to $xxxx dollars a share and you would be obligated to buy back in at that price, whenever the contract with your broker demands) and the reward is not infinite (the best you can do when you sell short is hope for bankruptcy), a buy and hold philosophy allows infinite reward with a non-infinite risk (you can only lose however much you pay for a stock).

I would bet that theres quite a few short sellers with Delphi, already. The idea behind short selling is that when you analyze a company's financials or position and find a discrepancy that makes you believe the company is overvalued, you essentially take a position against the company - you believe the stock price will drop.
 
i was thinking of selling short on google when it was at $490. woulda made a bundle. but i didn't check into what the margin call requirements are. plus i HAVE to use smith barney since i work there. it's a pain in the ass to trade now.
 
Google will be back up there after we begin to see some growth again. Nothing material in the company has changed, but techs are usually the first to take the hit during the time proceeding or during an on going recession.

I have faith google and Apple will both climb up high, again. ...but selling any of those stocks short, before the impending credit crisis was realized by the public would have been brilliant.
 
well, i know that google will rebound. it has a target price of $650. i was just going to hit the short, buy, then sell at the target price.
 
The company has already gone bankrupt. People keep recommending that I buy the stock, I just had a hard time believing that I could make a bunch of money when Delphi emerges from bankruptcy. So I asked the stock experts....on Hondaswap haha.

I didn't buy any google, but I bought mastercard when it first started trading and made out like a bandit.
 
Visa's IPO is this month, but you need a massive amount of backing to be eligible for that IPO after Mastercard did so well with their IPO.
 
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