How to Buy Stock in a Bankrupt Company

Stocks for bankrupt companies often trade on Pink Sheets.

Just because a company files for bankruptcy does not mean it is insolvent. Many companies file for bankruptcy in an effort to restructure their debt to prevent insolvency. Investors can still buy stock in a bankrupt company.

Stock Exchange Suspension

The stock price for a company drops when it files for bankruptcy. When the stock price falls below $1 per share for 30 days in a row, the New York Stock Exchange (NYSE) or National Association of Securities Dealers Automated Quotation (NASDAQ) suspends the company from listing on the exchange.

Pink Sheets

When the NYSE or NASDAQ delists a stock of a bankrupt company, you can purchase the stock by what investors refer to as trading on Pink Sheets. The Over the Counter Bulletin Board or OTCBB lists all Pink Sheet stocks.

Buying on Pink Sheets

Individual investors cannot purchase OTCBB stocks. You have to open an account at a brokerage house and instruct your broker which Pink Sheet stocks from bankrupt companies you want to buy.

References

• The New York Stock Exchange: NYSE Section 8 Suspension and Delisting
• Over the Counter Bulletin Board: Frequently Asked Questions