Nortel Networks question

[freddyw]

I have shares in Nortel Networks which recently filed for bankruptcy. If Nortel remains intact following the bankruptcy proceedings and is not completely broken up and sold off, will my shares be worth anything or do they reissue new stock as a new company? In other words, is it better to sell my shares now which are trading at .08/share or hope that Nortel can somehow get through this bankruptcy and become profitable again?

[ChrisC]

Where are the shares held? In a taxable account or tax deferred account like an IRA or Simple 401K?

I have NT shares as well. In bankruptcy, common equity holders generally get wiped out, and wiped out completely, such that there are no funds to distribute to common shareholders, especially if the bankruptcy is a so-called straight bankruptcy (a Chapter 7 liquidation or a Chapter 11 reorganization resulting in a substantial liquidation of the assets and liabilities of the entity.)

I have never received any payments for any of the common shares I've owned in a bankrupt publically traded company, although I suppose it's theoretically possible. (E.g. the shareholders of Freddy Laker Airlines, the pioneer of no-frills air travel, might have been paid something after the Airlines went bust and litigated and eventually settled multi-million dollar antitrust claims against a number of its competitors.)

Companies rarely remain "in tact" as far as common share ownership after a bankruptcy; the old shares are essentially "worthless." New ownership represented by new common shareholders generally emerge from a company successfully re-organized in bankrutpcy. Be careful about the tax treatment of these worthless securities. If you hold them in an IRA or some other tax deferred account, then I suppose you can't mine these losses for favorable tax treatment, but if you hold NT in a taxable account you should consult an accountant to make sure you appropriately report these securities for tax deduction purposes.

BTW, where are these shares being traded?

[freddyw]

Chris ..Thanks for the reply and feedback. The shares I hold are in a taxable account. I believe you can still trade NRTLQ on the Canadian Stock Exchange but I am not certain.

[al_bundy]

what does nortel do these days? i work for a customer and we still have some DMS 500 switches but everyone is going to IP telephony these days

[freddyw]

Quote:

Originally Posted by ChrisC Where are the shares held? In a taxable account or tax deferred account like an IRA or Simple 401K? I have NT shares as well. In bankruptcy, common equity holders generally get wiped out, and wiped out completely, such that there are no funds to distribute to common shareholders, especially if the bankruptcy is a so-called straight bankruptcy (a Chapter 7 liquidation or a Chapter 11 reorganization resulting in a substantial liquidation of the assets and liabilities of the entity.) I have never received any payments for any of the common shares I've owned in a bankrupt publically traded company, although I suppose it's theoretically possible. (E.g. the shareholders of Freddy Laker Airlines, the pioneer of no-frills air travel, might have been paid something after the Airlines went bust and litigated and eventually settled multi-million dollar antitrust claims against a number of its competitors.) Companies rarely remain "in tact" as far as common share ownership after a bankruptcy; the old shares are essentially "worthless." New ownership represented by new common shareholders generally emerge from a company successfully re-organized in bankrutpcy. Be careful about the tax treatment of these worthless securities. If you hold them in an IRA or some other tax deferred account, then I suppose you can't mine these losses for favorable tax treatment, but if you hold NT in a taxable account you should consult an accountant to make sure you appropriately report these securities for tax deduction purposes. BTW, where are these shares being traded?

I was able to trade my Nortel shares (NRTLQ) through my Vanguard Brokerage services. Not a pretty picture but at least I was able to get some of my investment back.