Zombies

DEFINITION of 'Zombies'

Companies that continue to operate even though they are insolvent or near bankruptcy. Zombies often become casualties to the high costs associated with certain operations, such as research and development. Most analysts expect zombie companies to be unable to meet their financial obligations.

Also known as the "living dead" or "zombie stocks".

BREAKING DOWN 'Zombies'

Because a zombie's life expectancy tends to be highly unpredictable, zombie stocks are extremely risky and are not suitable for all investors. For example, a small biotech firm may stretch its funds extremely thin by concentrating its efforts in research and development in the hope of creating a blockbuster drug. If the drug fails, the company can go bankrupt within days of the announcement. On the other hand, if the drug is successful, the company could profit and reduce its liabilities. In most cases, however, zombie stocks are unable to overcome the financial burdens of their high burn rates and most eventually go bankrupt.

Given the lack of attention paid to this group, there can often be interesting opportunities for investors who have a high risk tolerance and are seeking speculative opportunities.

RELATED TERMS
  1. Zombie Bank

    A bank or financial institution with negative net worth. Although ...
  2. Zombie Foreclosure

    A situation (or a home in this situation) that occurs when a ...
  3. Zombie Title

    A right to ownership and possession of a home that remains with ...
  4. Zombie Debt

    A type of bad debt that is so old a person may have forgotten ...
  5. Bankruptcy Risk

    The possibility that a company will be unable to meet its debt ...
  6. Accounting Insolvency

    A situation where the value of a company's liabilities exceeds ...
Related Articles
  1. Investing

    Chasing Down Biotech Zombie Stocks

    Find out whether you have "living dead" stocks lurking in your portfolio.
  2. Investing

    Pride and Prejudice and Zombies and the 99%

    Vampires have money. Zombies and zombie-hunters are basically everybody else.
  3. Credit & Loans

    The Curse Of Zombie Banks

    They may not eat brains, but zombie banks definitely hurt the economy. Find out more about this unstoppable horde.
  4. Credit & Loans

    Don't Get Trapped in a Zombie Foreclosure

    Understand how foreclosures work and you can avoid the disastrous consequences of having a zombie foreclosure.
  5. Personal Finance

    Dawn Of The Zombie Debt

    Are old debts coming back to haunt you? We'll show you how to keep these zombies from eating you alive.
  6. Options & Futures

    Haunting Wall Street: The Halloween Terminology Of Investing

    Beware of zombies and Jekyll and Hyde companies! Read about the spooky terms circulating Wall Street.
  7. Credit & Loans

    How To Beat Off A Zombie Debt Collector

    Sounds like a bad horror movie, but it really could happen to you. Here's how to identify zombie debt and send collectors back to the dead-debt graveyard.
  8. Investing Basics

    The Industry Handbook: Biotechnology

    Biotechnology uses of biological processes in the development or manufacture of a product or in the technological solution to a problem. Since the discovery of DNA in 1953, and the identification ...
  9. Fundamental Analysis

    How Pharmaceutical Companies Price Their Drugs

    Learn more about how pharmaceutical companies price drugs, why prices are often very high and why it can be difficult to settle on a suitable price.
  10. Economics

    Understanding Insolvency

    Persons or businesses that cannot meet their financial obligations are insolvent.
RELATED FAQS
  1. What are the primary risks associated with investing in the drugs sector?

    Learn more about the primary risks facing investors in the pharmaceutical and biotechnology industries. Find out how regulation ... Read Answer >>
  2. What is the drugs sector?

    Learn more about the drug industry and how new drugs are brought to market. Find out about how drug research is financed ... Read Answer >>
  3. What are the primary factors that drive share prices in the drugs sector?

    Learn about the primary factors that drive share prices in the drug sector. Creating and manufacturing drugs is a complex ... Read Answer >>
  4. What factors make the drug sector good for value investing?

    Discover what makes the drugs sector good for value investing. The perfect ingredient for value investors is to find undervalued ... Read Answer >>
  5. How does the profit margin compare for a generic drug versus a brand name drug?

    Learn how the profit margins compare for generic drugs and brand-name drugs. Brand-name drugs cost three to four times more ... Read Answer >>
  6. How does government regulation impact the drugs sector?

    Learn about how drugs are regulated by the U.S. government as well as the role of the Food and Drug Administration during ... Read Answer >>
Hot Definitions
  1. Law Of Demand

    A microeconomic law that states that, all other factors being equal, as the price of a good or service increases, consumer ...
  2. Cost Of Debt

    The effective rate that a company pays on its current debt. This can be measured in either before- or after-tax returns; ...
  3. Yield Curve

    A line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but differing maturity ...
  4. Stop-Limit Order

    An order placed with a broker that combines the features of stop order with those of a limit order. A stop-limit order will ...
  5. Keynesian Economics

    An economic theory of total spending in the economy and its effects on output and inflation. Keynesian economics was developed ...
  6. Society for Worldwide Interbank Financial Telecommunications ...

    A member-owned cooperative that provides safe and secure financial transactions for its members. Established in 1973, the ...
Trading Center