What Happens When a Stock Goes to Zero? 

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Written By
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Written By
Dan Buckley
Dan Buckley is an US-based trader, consultant, and part-time writer with a background in macroeconomics and mathematical finance. He trades and writes about a variety of asset classes, including equities, fixed income, commodities, currencies, and interest rates. As a writer, his goal is to explain trading and finance concepts in levels of detail that could appeal to a range of audiences, from novice traders to those with more experienced backgrounds.

When a stock’s price falls to zero, it means the company has gone bankrupt or its shares have become essentially worthless.

This situation typically arises from severe financial distress that leads the company to bankruptcy or a similar outcome where the company’s assets are insufficient to pay off its debts and obligations.


Key Takeaways – What Happens When a Stock Goes to Zero? 

Here’s what typically happens when a stock goes to zero:

  • Delisting: Once a stock falls below the minimum price required by the exchange it’s listed on (usually around $1), the exchange will delist the stock (remove it from trading on that exchange).
  • Stockholder equity wiped out: Stockholders who own shares of the company essentially lose their entire investment when the stock hits zero. Their shares become worthless.
  • Creditors take over: In a bankruptcy, the company’s creditors (bondholders, banks, etc.) have first claim on any remaining assets to recover what they are owed. Common stockholders are at the bottom of the capital structure (priority list).
  • Potential reverse stock split: In some cases before delisting, a company may attempt a reverse stock split to artificially increase the share price and remain listed. However, this doesn’t change the company’s market capitalization or financial situation.
  • Trading over-the-counter: Even after delisting, the nearly worthless stock may continue trading on over-the-counter (OTC) markets, but with extremely low liquidity.
  • Dissolution or restructuring: The company will likely be forced into bankruptcy court proceedings, where its remaining assets may be liquidated to pay creditors, or the company is restructured under new ownership/management.


Here are the key implications and processes involved when a stock’s value goes to zero:

For Shareholders

Total Loss of Investment

Traders/investors holding shares of the company essentially lose their entire investment.

Stocks represent equity ownership in a company, so if the company becomes valueless, so do the shares.

No Recourse

Common shareholders are last in line during the liquidation process.

After creditors, bondholders, and preferred shareholders are paid, there is usually nothing left for common shareholders.


For the Company

Bankruptcy and Liquidation

Often, a stock going to zero is a result of the company filing for bankruptcy.

Chapter 11 Bankruptcy

The company tries to restructure its debts and operations to potentially continue operating.

Nonetheless, even in this scenario, shareholders are often the last to get paid (if anything).

Existing shares can still become worthless if the company reissues new stock.

Chapter 7 Bankruptcy

The company’s assets are liquidated to pay off creditors as much as possible.

Common stockholders usually receive nothing.


The stock will likely be delisted from major stock exchanges if it fails to meet listing requirements, including maintaining a minimum share price.

It might then trade on over-the-counter (OTC) markets, but even that might cease if the company is liquidated.


For the Market and Regulators

Regulatory Oversight

The Securities and Exchange Commission (SEC) or relevant regulatory bodies might investigate the circumstances leading to the company’s downfall, especially if fraud or misconduct is suspected.

Market Impact

The direct market impact might be limited to the sector or industry of the bankrupt company, especially if the company wasn’t a major player.

However, large bankruptcies can have broader market implications, affecting investor confidence and sector valuations.


Recovery Possibilities

No Recovery for Shareholders

Once a stock goes to zero and the company is liquidated, shareholders generally have no chance of recovering any part of their investment.

New Beginnings

If the company restructures under Chapter 11 bankruptcy and survives, it may issue new stock.

However, holders of the original shares that went to zero don’t automatically receive new shares and are likely to have their investment wiped out.


Causes of a Stock Going to Zero

Fundamental Business Failure

The company’s business model or operations collapse entirely, with no prospect of recovery.

In most cases, it’s simply that expenses were above revenue and liabilities were above assets, and the business wasn’t economically viable.

Fraud or Scandal

Unethical or illegal practices are exposed.

This typically destroys the company’s reputation and leads to collapse.

Severe Market Downturns

Even fundamentally sound companies might see their stocks plummet to near-zero during extreme market crashes.

This is especially true of companies that are dependent on capital market access to keep funding their operations (which aren’t funded by the organic earnings of the business).

However, there’s always a potential for recovery when the market rebounds.


What Happens to Delisted Stocks

Over-the-Counter (OTC) Trading

Delisted stocks can sometimes still trade on OTC markets (also known as “pink sheets“).

These are less regulated and carry greater risk.


Occasionally, speculators might purchase heavily discounted shares of bankrupt companies hoping for a tiny chance of a miraculous turnaround.

Some institutional investors specialize in distressed investing and turnaround stories.




Most stocks don’t completely go to zero.

They’re typically delisted or acquired before reaching that point.

Avoid the Hype

Often, there are online forums or individuals who promote penny stocks nearing zero, promising potential rebound.

The reality is that these are extremely high-risk gambles.



When a stock goes to zero, shareholders lose their equity stake, the company faces delisting, creditors take control, and bankruptcy/dissolution becomes highly probable unless the company can somehow recover financially.

It serves as a stark reminder of the risks involved in investing in equities, especially in companies facing significant financial challenges.

Diversification and due diligence are foundational for traders/investors to reduce the risk of experiencing a total loss on their investments.