I was browsing airline stocks and I noticed that TWA is an amazing $0.03. What does that mean? Does that mean they are about to hit zero and drop off the face of the planet? Could they go back up to $50 a share and make someone rich? I really don’t even know what I’m trying to ask here so could someone just shed some all around light on the subject? Thanks.
Lots of stocks limp along at very low prices like the example you gave. Thus the term Ppenny stocks." But, and this is a WAG, for the price to get to zero would mean somebody bought and somebody sold at zero, which doesn’t really nake sense. Have you actually seen a stock listed at zero?
The only time I have was when I looked at a company that had been purchased by another a few years earlier, and I imagine that meant all of its stock had been converted to the acquiring company’s stock but the symbol had just never been delisted.
A stock doesn’t get to zero; it’s delisted first. In other words, the shares would no longer trade on any stock exchange.
A stock price actually reaches zero, when the company goes completely out of business. You can find worthless stock certificates (maybe on E-bay) and collect them. But as long as the company remains in business (even in bankruptcy), its stock has some value, if only because someone might be willing to pay $0.03 as a speculative venture.
When a company is bought out, its stock is replaced by stock in the purchasing company. That’s why sometimes a “worthless” stock certificate can be very valuable. A search might find that stock in Joe’s Automobile Works from 1910 is now an equivalent amount of stock in General Motors because GM bought the company in 1922.
I believe TWA is currently in the process of being bought out by American Airlines. Does this mean that if you bought TWA at $0.03 today, and the actual buyout happened tomorrow, you would suddenly have stock worth American’s current price of $19.14? If I’m doing my math right that means you could theoretically invest $1,000 in TWA today and have $638,000 in American Airlines tomorrow. Am I right?
Whilst not a reflection on TWA, there are hundreds of companies on the Australian Stock Exchange colloquially known as the “penny dreadfuls” which trade under 10c.
Australian companies tend to keep large numbers of shares on issue and hence their unit prices are low by US standards. It harks back to the gold rush days, when by keeping prices low e.g. one penny, individual miners were able to invest. There are only a handful of stock that trade above $30 per share. Typically when the unit prices get above these levels as hsare split is done.
The lowest price that can be quoted on the Australian stock exchange is 0.05c/share seller and no buyer.
I don’t know the details of the offer, but for this to occur AmAir would need to be offering to buy TWA on a 1:1 script basis. This would be highly unlikely. They may be buying TWA for cash so you might get around market price +/- a takeover premium. They may be offering one AmAir share for say every 500 TWA shares. Or a hybrid bid. Free kicks of 1/100th that magnitude are rare on the stock market.
Actually TWA has been acquired and was last traded on May 23rd.
So, the company no longer exists as an independent entity.
I suppose a search of the news could turn up the terms of the deal.
Yes, the AA purchase of TWA is legally complete. But that doesn’t necessarily mean that all the decades’ worth of TWA stock certificates stashed in every safe-deposit box, or under mattresses, or just forgotten were actually purchased or became worthless. As they get found, the owners can turn them in for AA stock, and the costs of the transaction may be more than the value of the TWA stock. The token listing price for TWA might reflect someone’s offer to take care of the dirty work, making a little money by doing it in bulk, while letting the owners of these stray shares get at least something for them.
I thought I saw this happen to webvan recently. They said if their stock is under a dollar for a month, they are unlisted. So what they did was a “reverse split”, to make their stock worth more than a dollar so it could stay on the exchange. clever, if only it succeeded.
Unlikely. Markets are generally considered to be highly efficient. That means that the stock price already reflect future expected value.
In other words, the stock will probably not jump that much because if people expected the price to be $19, they would start gobbling up shares until the price actually reached $19.