DEFINITION of 'Scrap Paper'

Stock certificates that have become worthless. When a company becomes bankrupt, in most instances, the value of shareholders' equity will approach zero. For shareholders with the physical stock certificate, they essentially become as valuable as "scrap paper".

BREAKING DOWN 'Scrap Paper'

Because creditors are paid before stockholders in bankruptcies, typically all physical stock certificates of a bankrupt company become scrap paper.

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RELATED FAQS
  1. How do you get a hard copy of a stock certificate?

    Before online brokers and personally-directed accounts, holding a physical stock certificate was a necessity, as this was ... Read Answer >>
  2. I lost my share certificate. Do I still own the stock?

    Regardless of whether a shareholder loses his or her stock certificate, that person still owns the shares. However, in order ... Read Answer >>
  3. I hold stock certificates in a company that just had a stock split. What happens ...

    The short answer is that a stock split will have little effect on the holder of stock certificates. In most cases when an ... Read Answer >>
  4. What happens to the stock of a public company that goes bankrupt?

    Occasionally, publicly listed companies go bankrupt. The company's shareholders, depending on the type of stock they hold, ... Read Answer >>
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