No. A stock price can't go negative, or, that is, fall below zero.
A drop in price to zero means the investor loses his or her entire investment: a return of -100%. To summarize, yes, a stock can lose its entire value. However, depending on the investor's position, the drop to worthlessness can be either good (short positions) or bad (long positions).
Common reasons stocks are delisted include the following: Falling below minimum share price thresholds (e.g. trading below $1 or $2 per share for 30 consecutive days) Market capitalization dropping below required levels and remaining below the threshold.
If you own securities, including stocks, and they become totally worthless, you have a capital loss but not a deduction for bad debt. Worthless securities also include securities that you abandon.
Can a stock ever rebound after it has gone to zero? Yes, but unlikely. A more typical example is the corporate shell gets zeroed and a new company is vended [sold] into the shell (the legal entity that remains after the bankruptcy) and the company begins trading again.
Your claimed capital losses will come off your taxable income, reducing your tax bill. Your maximum net capital loss in any tax year is $3,000. The IRS limits your net loss to $3,000 (for individuals and married filing jointly) or $1,500 (for married filing separately).
The price of a stock can fall to zero, but you would never lose more than you invested. Although losing your entire investment is painful, your obligation ends there. You will not owe money if a stock declines in value.
If you still hold shares after they are delisted, you can sell them—just not on the exchange on which they traded before. Stock exchanges are very advantageous for buying and selling shares. When they delist and trade over the counter (OTC), selling shares and getting a reasonable price for them becomes much harder.
For instance, say you sell 100 shares of stock short at a price of $10 per share. Your proceeds from the sale will be $1,000. If the stock goes to zero, you'll get to keep the full $1,000. However, if the stock soars to $100 per share, you'll have to spend $10,000 to buy the 100 shares back.
Yes, it is possible for a stock to recover from zero. The company can file Chapter 11 bankruptcy, restructure, and continue operating. At that point, the stock will unfreeze and you can trade it like normal again.
If the stock price drops (as the short seller expects), they can buy the shares back at the lower price. Buy them back and return. If the price falls to $30, the investor can buy back the shares at this new, lower price. They repurchase the shares at the reduced price ($30 in this case) and return them to the broker.
For a put writer, the maximum gain is limited to the premium collected, while the maximum loss would occur if the underlying stock price fell to zero.
Options strategies that involve selling options contracts may lead to significant losses, and the use of margin may amplify those losses. Some of these strategies may expose you to losses that exceed your initial investment amount. Therefore, you will owe money to your broker in addition to the investment loss.
The value of the stock itself can't go negative. It can only become zero is the company goes bankrupt. The only case when you can see negative result is if you bought the stock and the price declined. For example, you bought Walmart stock at $157 and it fell to $150.
If a company's stock is delisted from an exchange, shareholders still own their shares in the company, but the stock may trade over-the-counter, which could lead to decreased liquidity and less transparency for investors.
Sell Worthless Stock if Your Broker Holds the Shares
Many brokers have a plan to let their good customers sell them worthless stock for $1 or 1c for the lot. If you are a good customer, and stock is with the broker, ask. You should be able to negotiate some solution that will be satisfactory to both sides.
If the closing bid price of a company's shares are below $1.00 for 30 consecutive trading days, the company is considered to be in violation of Minimum Bid Price Requirement.
You can take a total capital loss on the stock if you own stock that has become worthless because the company went bankrupt and was liquidated.
When you come to sell or give away shares, you may have to pay capital gains tax, if they've risen in value since you bought or were given them. However, as with dividend tax, you have an annual capital gains tax allowance. It is only when your gains exceed this allowance that CGT is charged.
And while theoretically possible, the entire US stock market going to zero would be incredibly unlikely. It would, in fact, take a catastrophic event involving the total dissolution of the US government and economic system for this to occur.
If a stock is worth less than you paid for it, you don't owe money; you've just incurred a paper loss. It's unrealized until you sell the stock.
Current tax law does not allow you to take a capital gains tax break based on your age. In the past, the IRS granted people over the age of 55 a tax exemption for home sales, though this exclusion was eliminated in 1997 in favor of the expanded exemption for all homeowners.
How Long Do You Have to Wait to Sell a Stock After Buying it? Technically, there is no waiting period. You can sell a stock seconds after buying it. However, frequent day trading might classify you as a 'Pattern Day Trader' by the Financial Industry Regulatory Authority (FINRA), which carries certain requirements.