If a stock falls to or close to zero, it means that the company is effectively bankrupt and has no value to shareholders. "A company typically goes to zero when it becomes bankrupt or is technically insolvent, such as Silicon Valley Bank," says Darren Sissons, partner and portfolio manager at Campbell, Lee & Ross.
The only thing delisting does is that the stock doesn't trade on whatever exchange it got delisted from. It would still exist and you would still own it. No one is going to pay you out. It would trade over the counter.
Alternatively, investors can buy puts or short the company. Can a stock ever rebound after it has gone to zero? Yes, but unlikely.
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.
Do you owe money if a stock goes negative? No, you will not owe money on a stock unless you are using leverage, such as shorts, margin trading, etc., to trade.
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 short answer is yes, you can lose more than you invest in stocks – but only with certain accounts and trading types. In a typical cash brokerage account, it's possible to lose your entire investment, but no more.
Some stocks have gone to zero!
In fact, this is not an infrequent occurrence. According to statista.com, somewhere between 19,000 to 60,000 businesses file for bankruptcy every year in the United States, although not all of these are publicly traded companies.
Currently, if a company's stock falls below $1, it has 180 days to regain compliance with the minimum price requirement. If it fails to do so, the company can request an additional 180 days and, in some cases, appeal the delisting decision to a Nasdaq hearings panel.
The Impact of Delisting on Investors
However, a delisted stock often experiences significant or total devaluation. Therefore, even though a stockholder may still technically own the stock, they will likely experience a significant reduction in ownership. In some cases, stockholders can lose everything.
If the suspended company complies with all regulations, the exchange might revoke the suspension, and the shares will start trading again. If the company gets suspended and eventually closes, shareholders will have to write it off as a loss.
If a company is delisted, you are still a shareholder, to the extent of a number of shares held. And yet, you cannot sell those shares on any exchange. However, you can sell it on the over-the-counter market. This means you can look for a buyer outside the stock exchange.
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.
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.
If you are seeing 0.00 on the Portfolio or Valuation, this is generally because the stock is not traded on one of the regular markets that we follow, has been de-listed, or has changed their ticker symbol. For the first case, the easiest way to check this is to look at the ticker symbol from the broker.
Key Takeaways. Stock price drops reflect changes in perceived value, not actual money disappearing. Market value losses aren't redistributed but represent a decrease in market capitalization. Short sellers can profit from declining prices, but their gains don't come directly from long investors' losses.
Report any worthless securities on Form 8949. You'll need to explain to the IRS that your loss totals differ from those presented by your broker on your Form 1099-B and why. You need to treat securities as if they were sold or exchanged on the last day of the tax year.
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).
So can you owe money on stocks? Yes, if you use leverage by borrowing money from your broker with a margin account, then you can end up owing more than the stock is worth.
Key Takeaways. Selling a losing position helps preserve your fund and prevent further losses, especially in volatile or declining markets. Holding onto a losing position comes with an opportunity cost that ties up money that could be used for more profitable investments.
As long as you have sufficient time and money—whether from wages, retirement income, or cash reserves—it's important to stay the course so you can potentially benefit from the eventual recovery. That said, it generally makes sense to sell some investments and buy others as part of your regular portfolio maintenance.
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.
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.