Delta Airlines Stock

[JasperRealtor]

I have 900+ shares of DALRQDELTA
stock. This stock has gone down to .02 per share. Over the past year it has been between this low and around a dollar and a half. A couple weeks ago I heard the company was coming out of bankruptcy and was hoping the value would go up. Instead, it is dead and I see a new Delta stock listed as DAL Delta Air Lines Inc Del.
Anybody know what happened, how I messed up and how they can just bring out a different stock? Any info is appreciated.

[aquaswim47]

I'm really sorry you ended up owning these shares; it is the residual amount of the Chapter 11 reorganization settlement. There was only 2 cents per share left of what you purchased. These shares were cancelled. Remember, common stock holders are at the bottom of the pecking order. I wish you better success on future stock picks.

That's one reason why some members here advise a passive investment strategy composed of ETFs so that you don't have to take on company risk. I think that at least 85% of your investments should be in ETFs over the long-term and if you can only invest small amounts (such as $250) to use a mutual fund. If you have at least $1,000 and you plan to keep the money in an ETF for a minimum of 18 months, use an ETF instead of a mutual fund. If you have $250 per month to invest, choose a similar mutual fund and use it to invest for four months. When you have $1,000 to invest, than invest in the ETF. However, once you have $2,500, you can always dollar-cost average into an ETF using Zecco. The purpose is always to minimize expenses.

I wish you well in your investment career. It looks like you had at most $1,000 in this so learn from it and chalk it up to experience. Before investing in a company, make sure that it either has growth potential that will satisfy your potential risk (aggressive) or make sure that it has enough cash on hand to handle downfalls (conservative).

I like the 40 stock trades per month, but I would really use an ETF(s) (such as SPY, DIA, VTI, IOO, VBK, VO, PZI, EWJ, VPL, or MDY) or copy all the stocks in the Dow Jones Industrial Average and buy them all. This way, you don't repeat your Delta situation. Lets hope not.

If you would like a stock index to consider, I can provide it to you. It's a 120 stock index that I created that's about 25-30% invested internationally.

[JasperRealtor]

Thank you for the nice reply. It seems odd that a company can cancel a stock thereby making it worthless and at the same time create a new stock in the company. This may be common but I am an amateur.
Can I even sell the stock somehow to get my .02 per share back? It may cost more than I would receive. I bought them through sharebuilder if that means anything.
I will look into the ETF's you mentioned. I appreciate your help.

[gijoe9]

Chapter 11 is a nasty thing and over the last couple of years I have observed the throughs of agony a dying company can go through. Generaly when a company comes back from the dead it does so through a fiscal rebithing process that involves the restructuring of the debt. In order to finalize the restructure the old shares are cancelled and new ones are issued to pay off the old debt. The bottom line is do not buy shares of companies in chapter 11 unless you are prepared to lose 100% of your investment. On rare occasions a company can claw itself back from chapter 11 without cnacelling old shares and the issuing of new ones. This is the reason many people will speculate on companies like Delta when they are in chapter 11.
In example a Canadian steel company went bankrupt a few years back and then steel went through the roof last couple of years and in bankruptcy the company started to make a few dollars per share but it was to late and the shares were canceled any way after a lot of litigation. The debt holders had a strangle hold on the company and made a killing on it. The average Joe got killed in that one.

[aquaswim47]

I disagree that you have a lot to learn, since you learned a lot from your Delta stock. At two cents per share, you would get $18 and your commission costs are $14.95. If you can transfer the shares in-kind to Zecco, that's what I would do as long as there is no fee to leave Sharebuilder or to transfer the money to Zecco. That way you could sell it for free. I don't know whether Sharebuilder has a transfer fee or a termination fee. To get $3.05 in proceeds, I wouldn't even bother but if you transfer in-kind to Zecco, you may get the $18.

I'm hoping that you bought these 900 shares at under $1 per share so that your investment lost was less than $1,000. No matter what it was at, you can learn from this and pick another company in a better industry. I think that next time you will only put your money in speculative stocks that you can afford to lose. LEND is an example of a speculative stock; turn-around candidates are always speculative!!!!

I always like to see that a company has a lot of cash so that it can pay its bills. I'm less concerned about growth and love value investing. If you're a trend trader, you probably see things differently. You probably see growth in revenues and profits as being more important than how much cash it has as this will mean a larger appreciation in share price than a dividend payment ever could. I learned in my finance class that there is nothing that can offer a better rate of return than an investment in capital assets, including financial assets.