Effects

• As a company prepares to file for bankruptcy, its shares may trade for historically low amounts. Although these shares can be enticing, they will probably lose more value when the company completes their bankruptcy filing.
  
  

Identification

• When a company files for bankruptcy protection, it is de-listed from major stock exchanges and its ticker symbol is changed to five letters, ending with a Q. The final Q indicates the company is in bankruptcy protection.
  
  

Considerations

• Although a company may plan to file bankruptcy in order to shed debt and expenses, with the intention of continuing after bankruptcy, the stock of the bankrupt company will lose value and trading will eventually be stopped. If the firm offers new stock at a later date, shareholders from before or during the bankruptcy will not receive shares of the new company.
  
  

Warning

• It is impossible to pinpoint when the trading of a bankrupt company's stock will end. Given this uncertainty, you should only invest in a company that is planning to file for bankruptcy or currently bankrupt if you can afford to lose your entire investment.
  
  

Expert Insight

• The Securities and Exchange Commission reminds investors to make sure which stock they are purchasing, as some bankrupt firms may have two different stocks trading simultaneously. One stock is a remnant of the bankrupt company, while the second stock is shares in the restructured, viable company.