Legal Question in Bankruptcy in Texas
Bankrupt Corporations Stock Futures
I have been wondering about Enron and Kmart (for examples) going through bankruptcy, what happens to the stock values. Enron went from $75 to 25 cents! Can the share holders hope that in time the value of their shares will recover?
1 Answer from Attorneys
Re: Bankrupt Corporations Stock Futures
It's usually a pretty long road for stock values to recover after Chapter 11 bankruptcy. However, many companies do recover. Chrysler and Northwest Airlines are two examples I can think of. Chapter 11 bankruptcy is not my area of expertise but I believe that part of the plan of reorganization in a Ch. 11 is a conversion of shares. For example each old share may be converted into a new share at a rate of 100 old shares to 1.5 new shares. This helps to reestablish stock value although the shares are significantly diluted with respect to the stockholders.
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