Scrap Paper

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 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 >>
  3. 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 >>
  4. Is this stock certificate worthless?

    I bought 50,000 shares of restricted common stock from a company in December 2015 and received a stock certificate. I then ... Read Answer >>
  5. What protects an investor’s interest in the case of terrorist sabotage, or act of ...

    Currently, most stock ownership is done electronically thru the combined effort of the brokerage firms and the transfer agents ... Read Answer >>
  6. Can a business ever be too small to issue commercial paper?

    See why market forces regulate the size of companies that issue commercial paper, even though there are no official regulations ... Read Answer >>
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