I have 1000 shares of Circuit City CCTYQ trading at 20 cents. What happens if I don’t sell them. If another retailer buys the company, can the stock go up.
Thanks
Chapter 11 bankruptcy can also be called rehabilitation bankruptcy. It allows the firm the opportunity to reorganize its debt and to try to re-emerge as a healthy organization. What this means is that the firm will contact its creditors in an attempt to change the terms on loans such as the interest rate and dollar value of payments. Chapter 11 requires that a trustee be appointed. The trustee supervises the assets of the debtor and allows business to continue. It’s important to note that debt is not absolved in chapter 11: the restructuring only changes the terms of the debt, and the firm must continue to pay it back through future earnings.
If a company is successful in chapter 11, it will typically be expected to continue operating in an efficient manner with its newly structured debt. If it is not successful, then it will file for chapter 7 and liquidate.
In both instances, common shareholders will most likely see little (if any) return on their investments.
