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Word Count: 559
A companys securities may continue to trade even after the company has filed for bankruptcy under Chapter 11 In most instances companies that file under Chapter 11 of the Bankruptcy Code are generally unable to meet the listing standards to continue to trade on Nasdaq or the New York Stock Exchange However even when a company is delisted from one of these major stock exchanges their shares may continue to trade on either the OTCBB or the Pink Sheets There is no federal law that prohibits trading of securities of companies in bankruptcy Note Investors should be cautious when buying common stock of companies in Chapter 11 bankruptcy It is extremely risky and is likely to lead to financial loss Although a company may emerge from bankruptcy as a viable entity generally the creditors and the bondholders become the new owners of the shares In most instances the companys plan of reorganization will cancel the existing equity shares This happens in bankruptcy cases because secured and unsecured creditors are paid from the companys assets before common stockholders And in situations where shareholders do participate in the plan their shares are usually subject to substantial dilution If the company does come out of bankruptcy there may be two different common shares of stock with different ticker symbols trading for the same company One is the old common stock the stock that was on the market when the company went into bankruptcy and the second is the new common stock that was issued as part of the reorganization plan for the company If the old common stock is traded on the OTCBB or on the Pink Sheets it will have a five-letter ticker symbol that ends in Q indicating that the stock was involved with bankruptcy proceedings The ticker symbol for the new common stock will not end in Q Sometimes the new stock may not have been issued by the company although it has been authorized
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