EAAAAASY MONEY. Wait....too easy?
March 3, 2011 8:29 AM   Subscribe

IKnowNothingAboutStocks Filter

I love Borders (though my fiance insists that my Kindle and I are why they are slowly dying.) and it does hurt to see them go. But I looked at their stock price the other day and it's abysmal, obviously. Almost a quarter per share. So, would it be terribly stupid to throw, like, $50 into BGP? I mean, it's small enough that I wouldn't care if it was gone (which is the worst that would happen, right?,) but if their stock recovered even a little, it could stand to make a nice chunk of change. Nothing huge, but something.

This seems too easy, though.

Bonus question: What does Borders filing for bankruptcy mean for their shareholders? What will happen to their money?

Alternatively, could someone point me in a direction of a good place to go for learning about investing in stocks. I could call my bank (USAA,) but I'd rather just read stuff online for now since it's more of a curiosity.
posted by InsanePenguin to Work & Money (12 answers total) 4 users marked this as a favorite
Companies that declare bankruptcy are routinely delisted from the market, turning the value of all outstanding shares to nothing.

As Borders filed bankruptcy recently, it seems likely that delisting is in their immediate near future. So buying stock now is like asking to lose all of your money. Which is why the price is so cheap.
posted by valkyryn at 8:38 AM on March 3, 2011

Shareholders are generally screwed in bankruptcy proceedings; that's why the stock price is so low.

Use your $50 for something else.
posted by dfriedman at 8:38 AM on March 3, 2011

The probabilities of the stock becoming worthless or recovering have all been calculated by thousands of people. The current stock price represents the perfect summary of their best calculations. As does the price of every other stock. Putting your 50 dollars into any stock has an exactly equal likelihood of making or losing money. Unless you have inside information. In which case you will go to jail.
posted by Paquda at 8:43 AM on March 3, 2011 [1 favorite]

Don't bother investing in individual stocks. Index funds or ETFs with low fees are what you need to invest for the future. Read The Little Book of Common Sense Investing, pay attention to aset allocation and be wary of financial "advisors" (i.e., stay away from commissioned salespeople). That's 90% of personal finance right there.
posted by Homo economicus at 8:45 AM on March 3, 2011 [5 favorites]

Well that was fast.

Thanks, guys and gals!
posted by InsanePenguin at 8:46 AM on March 3, 2011

"So, would it be terribly stupid to throw, like, $50 into BGP?"

1) Stock price is a silly number to look at. Typically you need to look at earnings, and earnings per share, to decide if the price is over or undervalued. In this case you also need to look at their debt structure and assets.
2) You are essentially just handing your broker 50 dollars, once you consider trading fees.
3) Bankruptcy means shareholders are paid last if at all. The market price represents a best guess at what shareholders might get after bankruptcies. But that's really the estimated value calculation for a variety of scenarios, most of which involve the existing shareholders being wiped out. The process is complicated, which is why they specially mark bankrupt tickers, so novice investors like you are warned to stay away.
4) If you really like Borders and want to own the company, maybe just wait for them to emerge from bankruptcy?
posted by pwnguin at 8:46 AM on March 3, 2011 [1 favorite]

By the way, I don't mean to devalue anyone's answers here, it's just that every one has been great.
posted by InsanePenguin at 8:49 AM on March 3, 2011

Not a stock broker, not financial advice, etc etc etc. I've done similar trades, buying a company that is listed for dirt in the hope that maybe, just maybe, it would squeak through and be worth something. It worked out once when I bought Sirius at $0.07 a share. It's failed almost every other time. I'd equate a purchase of Borders at $0.25 to be a lottery ticket where you have no idea the odds of winning, but the odds are extraordinarily low. Yeah, you might make money, but don't rest any savings on it. Also, they've declared bankruptcy, so it's more or less a done deal.

Repeat: Don't consider this an investment if you do it. Consider it a lottery ticket.
posted by Mister Fabulous at 8:51 AM on March 3, 2011

As for your question about how to learn more about investing, JD Roth has an article on his Get Rich Slowly blog about this. You can find much more over there, too.
posted by CathyG at 10:03 AM on March 3, 2011

Posting again to second the recommendation for Get Rich Slowly.
posted by Homo economicus at 10:34 AM on March 3, 2011

valkyryn> Companies that declare bankruptcy are routinely delisted from the market, turning the value of all outstanding shares to nothing.

Delisting does not automatically turn the value of outstanding shares to nothing (although it's certainly not good for share prices). All delisting does is to make it so that the shares of that company aren't traded on that exchange.
posted by UrineSoakedRube at 1:41 PM on March 3, 2011

I did the same thing once. It's a great way to start learning about the stock market in my opinion.
posted by I-baLL at 1:42 PM on March 4, 2011

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