Is Buying Stock in a Bankrupt Company Worth the Risk?
Since Blockbuster Video filed bankruptcy back in September, its stock price has fluctuated from 4 cents to 23 cents, yet some investors are undeterred and still purchasing those shares.
This is not a new investment strategy; for years investors have bought stock in bankrupt companies with the hope there will be money remaining once all the company's creditors are repaid.
Some investment analysts view this as very risky, given that when a company files Chapter 11 restructuring, shareholders are the last to be paid. Therefore, unless the creditors are fully satisfied, shareholders will receive nothing.
In 2009 and 2010, only 4 out of 41 public companies delivered returns to shareholders after emerging from bankruptcy.
To learn more about this article, visit Why People Buy Stock in Bankrupt Companies.
For more advice relating to franchise acquisitions and bankruptcy, please contact the business attorneys of Wood, Atter & Wolf, P.A., in Jacksonville and Ponte Vedra Beach, Florida.
