SGI: We're not dead yet!

September 20, 2006 10:00 AM

What happens to the value of a company's stock when they declare banckruptcy and then exit bankruptcy?

I used to work for Silicon Graphics. I bought a few shares of stock. The, last May, SGI declared bankruptcy. Now, they're exiting bankruptcy, whatever that means. What happens to my stock? Did it disappear when they declared bankruptcy? I have an Etrade account, but haven't accessed it in years, and don't remember when I last got any mail from them.

posted by cosmicbandito to work & money (6 comments total)

What happens to the equity interest in a bankrupt company is whatever is decided in the reorganization plan that gets approved. According to section 4.9, "Old Equity Interests: Distributions. On the Effective Date, the Old Equity Interests shall be cancelled and the holders of Old Equity Interests shall not be entitled to, and shall not receive or retain, any property or interest in property on account of such Old Equity Interests under the Plan."
posted by milkrate at 10:17 AM on September 20, 2006

It looks like SGI's stock is still trading, under the name SGID.PK, but it's (1) not on any major exchange and (2) practically worthless, at $0.0295/share. You could probably still sell your stock, but based on the graph, it's not likely to be worth the trouble.
posted by xil at 10:19 AM on September 20, 2006

When sgi filed for bankruptcy the old stock was declared valueless so your old shares don't represent a stake in the company. When the company emerges from bankruptcy there will be new stock in the company but the bond holders will hold the majority of the shares and a few high ranking insiders will hold the remainder. Your old stock is still trading on the pink sheets at around 2 to 3 cents per share.
posted by substrate at 10:20 AM on September 20, 2006

As a follow-up: how does the poster's stock still have the 2-3 cents of value if it was "declared valueless" in the settlement? I read this article about pink sheets and I think I understand why small/new/in-trouble companies would have to list there, but why does a bankrupt company's stock retain any non-zero value at all?
posted by slenderloris at 12:04 PM on September 20, 2006

slenderloris, it's due to wishful thinkers and day traders. Some people held onto the stock because they hoped that the courts would award some money to them based on their shares, others even bought into it because they assumed the stock would end up worth something. Still other people bought on the downward dips in the hope they could make a tiny bit of money on other peoples optimism. As long as the stock trades it has a value, even if that value isn't based on anything tangible.

If sgi were still on NYSE then it would've been delisted and at that point the stock would've been worth $0.00. Instead they relisted on the OTCBB, were kicked off of there and onto the pink sheets.
posted by substrate at 1:46 PM on September 20, 2006

Excellent, thank you substrate.
posted by slenderloris at 11:18 AM on September 21, 2006