WHAT HAPPENS to my STOCK if a company goes BANKRUPT!

Описание: Ever wonder what happens to your stocks when a company files for bankruptcy?
That’s exactly what we are going to find out on this episode
Hi everyone, my name is Jose and welcome back to the IPO Nerd
The best place to learn about new companies going public and how to invest in them
As you probably heard by now, Revlon has filed for Chapter 11 Bankruptcy
This company has been around for almost 100 years! So that got me curious and wondering
What happens to my stocks when a company files for bankruptcy?
I did a poll on my Twitter and a lot of you are wondering the same!
Follow me on Twitter for the latest news and new content.

Well, the answer is: it depends
It depends on which type of bankruptcy the company files for
If the company files for Chapter 11 bankruptcy protection, it means that the company is asking for a chance to reorganize and recover
If a company files for Chapter 7, then the company is dead, and so are your shares
So, if you own any Revlon, the company is not completely dead just yet
As a matter of fact, the company is expecting to receive $575 million dollars to continue its day-to-day operations through a DIP loan.
A DIP loan or “debtor-in-possession” is a special kind of financing meant for companies that are in bankruptcy.
The DIP lenders take a senior position at the company and possession of the company assets ahead of previous lenders.
So, there is still a chance that Revlon will be able to reorganize and eventually pay back some of their debt.
If you think about it. A few years back, the rental car company Hertz was in the same position due to lack of customers during the pandemic.
After only 13 months, the company was able to recover by selling more than 200,000 vehicles and even added some Tesla’s to their fleet.

Ok, let’s say that the company you have stock in does not file for Chapter 11 or they file for Chapter 11 but are not able to recover
Well, then your stock is defunct, and you may at best, get a portion of their value back when the assets are diluted.
Once a company is in liquidation, the law determines how the assets are distributed.
First in line are secured creditors, second in line are unsecured claims by the Federal Reserve bank, third in line would be any unsecured claims up to $10,000 by an individual or corporation,
And all the way down at the bottom of the list after all secured and unsecured claims are paid, then stockholders and shareholders like you and I receive our payment if there’s any money left.
Bankruptcy can happen to anyone at any time. When it happens is bad for investors, bad for the company, and the economy.
No one is immune to bankruptcy, however, there are ways company can avoid it.
By making sure that their level of debt is not far greater than their level of cash flow.
And that is why it’s important to look at a company’s Balance Sheet before investing.
But that’s a topic for another video.
I hope I answer all your questions on this video, please make sure you subscribe and share it with your friends.
As always, makes sure you take care of yourselves, and ill see you soon.

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Disclaimer: I'm not a Financial Advisor. Please consult a professional before investing.

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