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When a company gets liquidated or goes bankrupt, it has an order of priority for creditors to be repaid, if there is anything left, then common stock holders get a portion of that for the newly formed company. This, however, is extremely rare. Usually they get nothing.In some cases the company may emerge, but it is really quite rare for the shareholders to come along for the ride. That's because equity shareholders are quite literally the last people in line to receive something from the bankruptcy. Behind the debt holders, behind the merchant creditors, behind the trustees, behind the employees, behind the tax man, and even the preferred shareholders.http://www.fool.com/news/foth/2002/foth020129.htm
When a company gets liquidated or goes bankrupt, it has an order of priority for creditors to be repaid, if there is anything left, then common stock holders get a portion of that for the newly formed company. This, however, is extremely rare. Usually they get nothing.
In some cases the company may emerge, but it is really quite rare for the shareholders to come along for the ride. That's because equity shareholders are quite literally the last people in line to receive something from the bankruptcy. Behind the debt holders, behind the merchant creditors, behind the trustees, behind the employees, behind the tax man, and even the preferred shareholders.
http://www.fool.com/news/foth/2002/foth020129.htm
