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What happens to a stock when a company goes bankrupt?

By Zippia Team - Dec. 9, 2022

When a company goes bankrupt, a stock essentially becomes worthless and stops paying dividends.

If the company in question is publicly traded, the shareholders might be entitled to a portion of its assets, but this depends on what types of shares they hold. In general, though, the stock of a company that goes bankrupt loses all of its value.

If the company is seeking Chapter 11 and survives, shares might survive as well, but the company can also choose to conceal existing shares, making the stock worthless.

If the company declares Chapter 7 bankruptcy, then the company is over, and so are any stocks in that company. They lose all of their value.

Owners of common stock often get nothing when a company goes bankrupt since the company will enter liquidation, and owners of common stock are the last in line for payment.

What happens to a stock when a company goes bankrupt?

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