BANKRUPT STOCKS.........
Just a friendly warning, that this is probably a "PUMP & DUMP"
scam of some kind.
A company's securities may continue to trade even after the
company has filed for bankruptcy under Chapter 11. In most
instances, companies that file under Chapter 11 of the
Bankruptcy Code are generally unable to meet the listing
standards to continue to trade on Nasdaq or the New York Stock
Exchange. However, even when a company is delisted from one of
these major stock exchanges, their shares may continue to trade
on either the OTCBB or the Pink Sheets. There is no federal law
that prohibits trading of securities of companies in
bankruptcy.
There is no law that says an investor can't buy, or pay what-
ever he wants, for a piece of paper representing a defunct
company, which is now only suitable for framing.
Note: Investors should be cautious when buying common stock of
companies in Chapter 11 bankruptcy. It is extremely risky and
is likely to lead to financial loss. Although a company may
emerge from bankruptcy as a viable entity, generally, the
creditors and the bondholders become the new owners of the
shares. In most instances, the company's plan of reorganization
will cancel the existing equity shares. This happens in
bankruptcy cases because secured and unsecured creditors are
paid from the company's assets before common stockholders.
If the company does come out of bankruptcy, there may be two
different types of common stock, with different ticker symbols,
trading for the same company. One is the old common stock (the
stock that was on the market when the company went into
bankruptcy), and the second is the new common stock that the
company issued as part of its reorganization plan.
If the old common stock is traded on the OTCBB or on the Pink
Sheets, it will have a five-letter ticker symbol that ends
in "Q," indicating that the stock was involved with bankruptcy
proceedings. This stock is most likely worthless, and is only
trading as a way for past owners to recoup some of their losses
by "passing the paper" to some other sucker.
It is like buying an antique; it appears to have value, but,
in reality, has no value since there are no legal claims on
company assets.
The ticker symbol for the new common stock will not end in "Q".
Sometimes the new stock may not have been issued by the
company, although it has been authorized. In that situation,
the stock is said to be trading "when issued," which is
shorthand for "when, as, and if issued." The ticker symbol of
stock that is trading "when issued" will end with a "V". Once
the company actually issues the newly authorized stock, the
"V" will no longer appear at the end of the ticker symbol.
Be sure you know which shares you are purchasing, because the
old shares that were issued before the company filed for
bankruptcy may be worthless if the company has emerged from
bankruptcy and has issued new common stock.
AI
