Yes, most reorganized companies create new shares to satisfy Secured Creditors and sometimes Unsecured Creditors. Former shareholders lose everything with the cancelled previous equity, unless there are specific allowances to previous shareholders, eg., a substantial reverse split to previous holders or warrants to buy new shares at a discount.
It is definitely not right but the U.S. Bankruptcy Laws protect Secured Creditors and a public company's right to exist as a public company provided the Secured Creditors support the reorganization.
As an example, General Motors wiped out all shareholders and pensioners by simply declaring bankruptcy and creating NEW reorganized equity that gave them billions of free dollars. There are thousands of other examples where former shareholders lost everything when the reorganized company's shares were cancelled and NEW shares created out of thin air.
It's like waving a magic wand, wiping out a lot of debt with NEW shares.
The U.S. Bankruptcy Laws are horribly wrong in not protecting former shareholders.
News 
Market Data 
Discover 
