Stocks of companies in bankruptcy trade for pennies

By
USA Today
January 28, 2009, 11:09 AM ET
3 min read

— -- Q: What has happened to the stocks of companies that have gone under?

A: "Gone under," could mean many things.

Do you mean companies that have seen their stock prices plummet? Do you mean firms that have been delisted from a stock exchange? Do you mean companies that have filed for bankruptcy reorganization? I'll take a stab at what I think you mean, but if I miss it, feel free to send another e-mail to clarify.

Usually when people say "go under" they mean firms that have filed for bankruptcy protection. BankruptcyData.com is a helpful source for data on companies that file for bankruptcy protection. On the site's main page, you can see a list of the companies that have filed most recently.

If you click on the "Research Center" link on the left-hand side of the page, you'll get even more information. The lists of the largest bankruptcies of all time or in particular years are especially interesting.

For instance, you can see that the largest public company filings for bankruptcy protection last year were Lehman Brothers, Washington Mutual, IndyMac Bancorp., Downey Financial and Tribune. If you're interested in other years, you can click around for the data you need.

2008's filings provide a quick glimpse into the answer to your question: Generally, shareholders in these companies haven't fared so well. Lehman Bros. has broken into dozens of pieces, parts going to Barclays, Nomura and Bain Capital. The shares now trade on the Pink Sheets as lehmq for 5 cents a share.

Washington Mutual was bought by JP Morgan Chase at a deep discount and the shares trade on the Pink Sheets wamuq for about 4 cents apiece. IndyMac Bancorp idmcq was taken over the by the U.S. government, then sold to private investors. The shares are trading, you guessed it, on the Pink Sheets, for 11 cents a share.

Downey's bank operations were bought by U.S. Bancorp in 2008 and the holding company is in bankruptcy protection. Shares of Downey's holding company trade on the Pink Sheets dwnfq for 4 cents a share. And Tribune continues to operate in bankruptcy protection trbcq. The company went private on Dec. 20, 2007 and the stock was largely owned by an employee stock purchase plan.

Matt Krantz is a financial markets reporter at USA TODAY and author of Investing Online for Dummies. He answers a different reader question every weekday in his Ask Matt column at money.usatoday.com. To submit a question, e-mail Matt at mkrantz@usatoday.com. Click here to see previous Ask Matt columns.