SI
SI
discoversearch

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor.  We ask that you disable ad blocking while on Silicon Investor in the best interests of our community.  If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.
Microcap & Penny Stocks : red and blue BBQs - patience, trust and DD
 Public ReplyPrvt ReplyMark as Last ReadFilePrevious 10Next 10PreviousNext  
To: RockyBalboa who wrote (23)8/3/2001 10:29:23 PM
From: RockyBalboa  Read Replies (1) of 49
 
Stock will be ZERO!!

Why Stock will trade for $ When it is Worthless!!

When a company has announced its stock will be worthless, yet it trades (meaning people are buying it) people will ask two questions: a.) If it will become worthless, how come it is selling for $.25 or whatever it trades at. b.) If people are buying it they must know something?
This is very common with Chapter 11 companies in the "twilight zone" of
between when they file Chapter 11 and the final reorganization plan or liquidation is put into effect. In fact, one very bizarre case was Discovery Zone where on the very day the stock was cancelled the stock zoomed from ten cents
to a dollar (for a few minutes) as people misunderstood the press release which talked about the "new" people who had taken over the company (without realizing that those "new" people also had been given ALL of the "new" stock and thus their stock was worthless.) The basic reasons seem to be:
a.) Inertia on selling ...Those who should be selling do not as they feel "How much more do I have to lose...so may as well hold on till the very
end" (Well, what you have to lose is the total value after commissions you could get by selling...so if you want to throw it away, please give it to me!)
b.) Greed ...People see these things bob up and down and hope to "double"
their money with no research, no effort etc. Thus the prior bizarre behavior of some of these in Chapter 11 (like Caldor, Bradlees, Edison Brothers etc before the stock was cancelled) has reinforced "bad" behavior.
c.) Confusion and ignorance about what is truly happening in Chapter 11 and so people do buy because in a retailing example.. they might see good crowds in the store and have a difficult time separating the future of this piece of paper called "old common stock" with the future of the company that is in bankruptcy. OR they may read a favorable earnings report and think it helps. Yes, certain business products may make money for the company or its future owners...but unfortunately not for the benefit of the "old" common stock holders.
d.) Traders and Hypesters who prey on b.) and c.) above to promote and
get people to buy.
e.) In the early stages short covering of massive short positions usually taken as the stock is cascading towards bankruptcy...

Just because you see the stock going higher, don't assume someone must "know something." Kind of like the same logic as not assuming your neighbor knows how to fly because you see him jump off the roof!!
Report TOU ViolationShare This Post
 Public ReplyPrvt ReplyMark as Last ReadFilePrevious 10Next 10PreviousNext  

HomeMailHotSubjectMarksPeopleMarksKeepersSettings
Terms Of UseContact UsCopyright/IP PolicyPrivacy PolicyAbout UsFAQAdvertise on SI
© 2025 Knight Sac Media.  Data provided by Twelve Data, Alpha Vantage, and CityFALCON News