Looking at betting on gross securities, demon stocks, and bankrupt stocks, I believe quite a few friends have followed suit at KBIO, Archie Coal, and the National Bank of Greece. However, recently there are still many friends who have gone back and forth to invest in the tobacco chip stock SUNE. I think the biggest risk of investing in gross notes is delisting, and I've also recently been considering whether to invest in gross notes, so I checked the delisting process of US companies and shared it with you.

The following will be covered in this post

What happens when a company files for bankruptcy protection? Who is going to protect the interests of our little people? What should I do if there are too many bankrupt stocks? What is the bankruptcy process? How can I check bankruptcy notices, etc.?

What happens when a company files for bankruptcy protection?

Looking at it now, if a company applies for bankruptcy protection, it may choose one of the Chapter 7 and Chapter 11 of the Bankruptcy Law for execution. Let's take a quick look at the differences between these two laws.

The US Bankruptcy Code governs how companies stop operating or how to get out of the debt abyss. When a company is close to running out of trouble, it can invoke Chapter 11 of the Bankruptcy Law (that is, chapter 11, which we often see in company disclosure documents) to “restructure” the business and try to make a profit again. A bankrupt company, or “debtor,” can still operate as usual. The company's management continues to be responsible for the company's day-to-day business, and its stocks and bonds also continue to be traded in the market, but all major business decisions of the company must be approved by a bankruptcy court, and the company must also submit reports to the Securities and Exchange Commission.

At the same time, a company can also file for bankruptcy based on Chapter 7 of the Bankruptcy Law (that is, chapter 7, which we often see in company disclosure documents), and all of the company's business must be completely stopped immediately. The bankruptcy estate custodian “clears” (auctions) the company's assets, and the funds obtained are used to repay the company's debts, including debts to creditors and investors. Shareholders' stock usually becomes a waste sheet of paper, because if the bankruptcy court determines that the debtor is insolvent (the debt is greater than the asset), the shareholder's investment cannot be returned. Furthermore, after the company's assets are liquidated and priority is paid to secured creditors and unsecured creditors, there is often little left.

What is the order of distribution after bankruptcy?

• Secured creditors: usually refers to banks, because they usually have the company's collateral (real estate, company assets, etc.), so if the company goes bankrupt, priority payments will be made.

• Bond buyers have a higher priority in repayment of their debts than equity holders. If the company goes bankrupt, bond buyers will pay before equity holders.

Generally, companies will choose Chapter 11 of the Bankruptcy Law (that is, chapter 11, which we often see in company disclosure documents) to complete bankruptcy protection, so here we will focus on the relevant content of Chapter 11 of the Bankruptcy Law.

What happens to my stock after bankruptcy?

After filing bankruptcy protection, some companies will withdraw from the NYSE and NASDAQ markets because they do not meet the listing standards of the NYSE and NASDAQ, and trade on the Fanbill or OTCBB markets. Those who have gambled on the National Bank of Greece must know that after the company is delisted, stocks can be closed (meaning if you go long, you can close the position by selling it; if you go short, you can buy stocks to close the position).

After bankruptcy, if the company's delisting is completed in accordance with Chapter 11 of the Bankruptcy Law, how will the stock code be changed? There may be two forms of stock codes

• The first one is an old common stock (that is, the stock we held before delisting). If the old stock is traded on the OTCBB or ticket market, it will have a 5-letter code, and the last letter “Q” indicates that the stock is participating in the bankruptcy process. For example, Aci Coal (ACI), which was delisted some time ago, became the transaction code for the powder market (ACIIQ), indicating that it is in the delisting process

• The second is new common stock, which was issued as part of its restructuring plan. The last letter doesn't end with a “Q”. For example, the National Bank of Greece (NBG), which was delisted last year, became the transaction code for the bank note market (NBGGY)

Risk warning

• Investors should be careful about stocks of companies that are about to go bankrupt. Because of its high risk, it may result in financial losses.In most cases, the company's restructuring plan will eliminate existing stocks. As mentioned before, bond buyers have a higher priority in repayment than equity holders. In the case of bankruptcy, debt payments may be made in the form of stock increases, which in turn causes stock prices to be heavily diluted.

• The difference between a debtor's solvency determines the value of its assets and liabilities. If the debtor (company) has less assets than liabilities, your stock may also be worthless (chapter 7). If your assets are still higher than your liabilities, after delisting, your shares will be automatically converted to bank notes or OTCBB markets for trading (chapter11).

The following is the composition of personnel participating in the bankruptcy committee in the event of bankruptcy

Here are the steps you'll go through when you go bankrupt

Of course, in the event of bankruptcy, if you hold shares in the company, you may also receive emails to vote on the company's restructuring plan, but since your shareholding ratio is very high, your voting power will also be very low.

How can I get more information?

For bankrupt companies, contact the bankrupt company's “Investor Relations Department” for more information, including the steps for bankruptcy, the location of the bankruptcy court, phone numbers, etc.

Check the SEC's official website, search for the company you are interested in, and check the 8-k file. This document will reveal how the company went bankrupt (chapter 7 or chapter 11) and related progress.

Attached are recent gross notes: SunEdison (USSUNE), Ultra Petroleum (UPL), XG TECHNOLOGY INC (XGTI), SOUTHERN CONN BANCORP INC (SSE), ENERGY XXI (EXXI), ELEVEN BIOtherapeutics (EBIO), SKLNW (SKLNW).

Beware of delisting risks when handling gross tickets!