there’s no rational reason to invest in companies that have filed for Chapter 11.
The most likely outcome is that you get wiped out. This could happen if the company cancels its common stock and hands over equity to the creditors. Or, like in the case of Sears, a separate entity acquires the operating assets. In that scenario, the proceeds are distributed to creditors, and shareholders get nothing. This may wind up happening, given news of private equity firm Sycamore Partners’ interest in buying the company out of bankruptcy.
Alternatively, the company could liquidate completely, distribute proceeds to creditors, and again, leave shareholders with zero. No matter how you cut it, there’s likely no underlying value left for shareholders.
