What happens if I maintain a short position in a stock that is delisted and declares bankruptcy?

By Investopedia Staff AAA
A:

The short seller owes nada. Nil. Zip. Zero.

When you short sell you borrow the shares, sell them on the market, and then collect the proceeds as cash. If you wanted to get out of the position, you would have to buy back the same number of shares to repay the person (or brokerage) from whom you borrowed them. If you buy back the shares at a price lower than the price at which you originally sold them, you collect the difference - so short selling is a way to profit from a falling stock. But if the company is delisted and bankrupt, you don't have to pay back anyone because the shares are worthless.

Note: This is the best possible scenario for a short seller.



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