Stocks and Bankruptcy
As Mhoran said, the risks of buying a bankrupt company are huge, and even successful bankruptcy turnarounds don't involve keeping the same stock. For instance, the GM bankruptcy was resolved by the company more or less selling all its valuable assets (brands, factories, inventory) to a new version of itself, using that money to pay off what liabilities it could, and then dissolving. The new company then issued new stock, and you had to buy the new stock to see it rise; the old stock became worthless. AA could have gone the same way; Delta could have bought it out of bankruptcy and consumed it outright, with any remaining shareholders being paid off at market value. That's probably the best the market was hoping for. Instead, the deal is a much more equal merger; AMR brings a very large airport network and aircraft fleet to the table, and Delta brings its cash, an also-considerable fleet and network, and a management team that's kept that airline solvent. The stockholders, therefore, expect to be paid off at a much higher per-share price, either in a new combined stock, in Delta stock, or in cash. "When they entered Bankruptcy they changed their stock symbol from AAMR to AAMRQ. The Q tells investors that the company i in Bankruptcy. This i what the SEC says about the Q: ""Q"" Added To Stock Ticker Symbol When a company is involved in bankruptcy proceedings, the letter ""Q""   is added to the end of the company's stock ticker symbol. In most   cases, when a company emerges from bankruptcy, the reorganization plan   will cancel the existing equity stock and the old shares will be   worthless. Given that risk, before purchasing stock in a bankrupt   company, investors should read the company's proposed plan of   reorganization. For more information about the impact of bankruptcy   proceedings on securities, please read our online publication,   Corporate Bankruptcy. The risks are they never recover, or that the old shares have nothing to do with new company. Many investors don't understand this. Recently some uninformed investors(?) tried to get a jump on the Twitter IPO by purchasing share of what they thought was Twitter but was instead the bankrupt company Tweeter Home Entertainment. Shares of Tweeter Home Entertainment, a Boston-based consumer   electronics chain that filed for bankruptcy in 2007, soared Friday in   a case of mistaken identity on Wall Street. Apparently, some investors confused Tweeter, which trades under the   symbol TWTRQ, with Twitter and piled into the penny stock. Tweeter, which trades over the counter, opened at 2 cents a share and   jumped as much as 15 cents — or 1,800 percent — before regulators   halted trading. Almost 15 million shares had changed hands at that point, while the   average daily volume is closer to 150,000. Sometimes it does happen that the new company does give some value to the old investors, but more often then not the old investors are completely wiped out."
"The only thing that makes a stock worthless is when the company goes out of business. Note that bankruptcy, by itself, does not mean the company is closing. It could successfully restructure its affairs and come out of bankruptcy with a better outlook. Being a small or unprofitable business may cause a company's to trade in the ""penny stock"" range, but there is still some value there. Since most dying companies will pass through the penny stock phase, you may be able to track down what you're looking for by finding companies who have been (or are about to be) delisted. Delisting is not death, it's just the point at which the company's shares no longer meet the qualifications to be traded on a particular exchange. If you find old stock certificates in your grandmother's sock drawer, they may be a treasure, or they may be worthless pieces of paper if the company changed its ownership and Grandma didn't know about it." "If Illinois cannot go bankruptcy This is missing a few, very important words, ""...under current law.""   The United States changed the law so as to allow Puerto Rico to go into a form of bankruptcy.  So you cannot rely on a lack of legal support for bankruptcy to protect any bond investments you might make in Illinois.  It is entirely possible for the federal government to add a law enabling a state to discharge its debts through a bankruptcy process.  That's why the bonds have been downgraded.  They are still fine now, but that could change at any time.   I don't want to dive too deep into the politics on this stack, but I could quite easily see a bargain between US President Donald Trump and Democrats in Congress where he agreed to special privileges for pension debts owed to former employees in exchange for full discharge of all other debts.  That would lead to a complete loss of value for the bonds that you are considering.  There still seem to be other options now, but they seem to be getting closer and closer to that." Also VW has more brands, i.e. is more diversified This isn't necessarily a good thing for investing.  It makes the company less likely to go down, but it limits your portfolio.  For example, say you think that Hyundai is a good alternative to Volkswagen (VW) but really like Audi.  If you buy VW, you get some Audi but a lot more of the rest of VW.  Then if you bought Hyundai, you'd be overrepresented in that segment of the market.   Audi may not be structured uniquely, but it is still the only company selling Audi brand cars.  Perhaps someone thinks that those models will do well.  That person may think that Audi will do exceptionally well in its niche.   Having many brands isn't necessarily great.  General Motors had something like sixteen brands before declaring bankruptcy.  It only has twelve now.   Now, it sounds like you feel the opposite about it.  You don't particularly like Audi as a stock and like VW better.  Your reasons sound perfectly reasonable (I know little about either company).  It may even be that VW is the only one buying Audi stock, because everyone else has the same view as you. Tuition debt is much higher than car loan debt. Delinquency rates on student loans are at 13% and rising, you can't get it dismissed in bankruptcy court.   [debt balance and it's composition](https://www.newyorkfed.org/medialibrary/interactives/householdcredit/data/pdf/HHDC_2016Q4.pdf)  Stock Market Bubble. Looks pretty overvalued [price to earnings](http://www.multpl.com/shiller-pe/)  The only real economic ace in the hole Trump has right now is getting the U6 unemployment closer to U3 by reducing the welfare state and getting people into full time employment, Mick Mulvaney talked about this last month. Investment banks will put out various reports and collect revenues from that along with their banking activity.  I don't read them or care to read them myself.  If banks can make money from something, they will likely do it, especially if it is legal. To take the Tesla stock question for a moment: Aren't you ruling out that yesterday was the day that Tesla was included in the Nasdaq 100 and thus there may be some people today exiting because they tried to cash in on the index funds having to buy the stock and bid it up in a sense?  Or as @littleadv points out there could be those tracking the stocks not in the index that would have been forced to sell for another idea here. The Goldman note is a possible explanation but there could well be more factors in play here such as automated trading systems that seek to take advantage of what could be perceived as arbitrage opportunities. There can be quick judgments made on things which may or may not be true in the end.  After all, who knows exactly what is causing the sell-off.  Is it a bunch of stop orders being triggered?  Is it people actually putting in sell order manually?  Is it something else?  There are lots of questions here where I'm not sure how well one can assign responsibility here. I don't know what you're talking about. If anything bankruptcy has become more creditor friendly over the years, which is only logical because business debtors don't really lobby for friendlier bankruptcy rules when they're not planning on being bankrupt. The only difference is that debt is more readily available and a bigger part of doing business today, so you'll naturally see more reorganizations. "The short answer is that the exchange of the stock in exchange for the elimination of a debt is a taxable exchange, and gains or losses are possible for the stock investor as well as the bank.   The somewhat longer answer is best summarized as noting that banks don't usually accept stocks as collateral, mostly because stock values are volatile and most banks are not equipped to monitor the risk involved but it is very much part of the business of stock brokers.   In the USA, as a practical matter I only know of stock brokerages offering loans against stock as part of the standard services of a ""margin account"". You can get a margin account at any US stock broker. The stockholder can deposit their shares in the margin account and then borrow around 50% of the value, though that is a bit much to borrow and a lower amount would be safer from sudden demands for repayment in the form of margin calls. In a brokerage account I can not imagine a need to repay a margin loan if the stocks dividends plus capital appreciation rises in value faster than the margin loan rate creates interest charges...  Trouble begins as the stock value goes down.  When the value of the loan exceeds a certain percentage of the stock value, which can depend on the stock and the broker's policy but is also subject to federal rules like Regulation T, the broker can call in the loan and/or take initiative to sell the stock to repay the loan.   Notice that this may result in a capital gain or loss, depending on the investor's tax basis which is usually the original cost of the stock.  Of course, this sale affects the taxes of the investor irregardless of who gets the money." "I'll skip the ""authorizing...."" and go right to uses of new shares: Companies need stock as another liquid asset for a variety of purposes, and if not enough stock is available, then may be forced to the open market to acquire, either by exchanging cash or taking on debt to get the cash."