Want To Buy Stock Of Bankrupt Company? MODTQ, BUTLQ, EOPIQ, GACFQ, PLBSQ

The Q stocks were hot again today.  After QSIGQ pulled a rare, common stock holders don't get the shaft maneuver every Q stock is catching a bid as traders try and find the next miracle Q.  When I say Q I am referring to the last and fifth letter of the stock ticker.  Almost all penny stocks have 4 letters in their tickers, but some do have a fifth.

A penny stock with a fifth letter is usually a bankrupt, a foreign company, or a stock that has recently performed a stock split.  If the company is bankrupt the stock ticker gets a Q at the end of it.  If the company is a foreign company it gets an F for the fifth letter.  Stocks like Hieneken and Nestle Water trade on Pink Sheets as ADR's and they get the letter Y after them. A company that just split its stock gets a D as a fifth letter.

Now that you understand the lettering system for penny stocks I have a question for you.  Want To Buy Stock Of Bankrupt Company?  And if you do what type of return do you think a bankrupt stock usually provides?  If that bankrupt company ever remergers from bankruptcy how much do you think your shares are going to be worth?  These are important questions you should answer before buying a bankrupt stock.

To answer my own question, what type of return do you think a bankrupt stock usually provides, if the recent Q rallies are any indication Q stocks can and have offered big gains.  But those gains are almost always short lived.  Q stocks have a Q after them for a reason.  A company files for bankruptcy because they are underwater and can not pay their debt.  While you may read news about a company emerging from bankruptcy,  95% of the time common stock holders get nothing and secured creditors and bondholders get a nice equity interest in freshly issued common stock.  That Q stock you bought after reading about the company reemerging from bankruptcy is still, for all intents and purposes, still a dead Q stock and is likely to remain that way for a very long time.  It is very rare for common stock holders to get anything other than the shaft in a bankruptcy reorganization.  Common stock holders are always last in line.

To answer my second question, If that bankrupt company ever reemerges from bankruptcy how much do you think your shares are going to be worth, those Q shares are more than likely going to be worth a lot less than you bought them for.  For the rare Q stock's that actually come out of the bankruptcy, the common stock holder sees his/her stake heavily diluted.  You may see your Q shares equity stake in the company drop 90% as the reorganization gives shares to the debt holders and once again does nothing for the common stock holders.

Even if you look at QSGIQ, while its run has been immense, after the news was released the stock has fallen.  If you do stumble across a rare common intact type bankruptcy emergence, where the common stock isn't going to get diluted and split to screw over shareholders, buying before everyone finds out about this can be very lucrative.  Once the good news hits the wires that part of the Q play is done and now you need to be looking at what the true value of those shares are.

The real question is why are people buying bankrupt stocks?  Like any penny stock, its pure speculation.  QSGIQ ran from sub $.01 to over $.60 the other day.  It can happen.  Money wasn't made waiting for QSGIQ to issue the common stock intact press release. The stock has fallen after that news hit.   The money was made doing the research, finding the stock and buying it well before anyone else.  If all these Q runners today reemerge from bankruptcy with the common stock holders not getting the shaft, then these stocks have much farther to run. 

Without actually doing the research yourself you are relying on the stock's moves and message board rumors to drive the stock, which can be very risky.  Of course buying a Q stock like all penny stocks, carry tremendous risk.

What I do like about Q stocks is there is no dilution, which also makes them ripe for manipulation.  A group could buy up the float without fear of the company dumping fresh share into the market and killing the stock.  So while Q stocks do offer the very rare reemergence from bankruptcy with common stock intact play, they also are ripe for manipulation.  With QSGIQ still fresh in traders minds and rumors about other Q stocks possibly following on the same path are seeing their shares bought with reckless abandon.  As a trader, and we've been watching these stocks the last few days now go up, unless you know for sure, you need to be trading the Q momentum and moving on.

Of course there is always the chance another QSGIQ comes along.  Could it be MODTQ, BUTLQ, EOPIQ, GACFQ, PLBSQ are all emerging from bankruptcy and taking their common stock holders with them?  That remains to be seen.  For now lets enjoy the moves and have a nice, relaxing weekend.