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. Insights

    Pride and Prejudice and Zombies and the 99%

    Vampires have money. Zombies and zombie-hunters are basically everybody else.
  3. Investing

    Don't Get Trapped in a Zombie Foreclosure

    Understand how foreclosures work and you can avoid the disastrous consequences of having a zombie foreclosure.
  4. 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.
  5. Insurance

    Haunting Wall Street: The Halloween Terminology Of Investing

    Beware of zombies and Jekyll and Hyde companies! Read about the spooky terms circulating Wall Street.
  6. Personal Finance

    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.
  7. Investing

    Corporate Bankruptcies Jump in China

    Chinese corporate bankruptcies have risen more than 50% over the past year on falling commodity prices and rising labor costs
  8. Investing

    Why China Keeps Dead Corporations Walking

    Here's why the Chinese government keeps lending more money to zombie corporations.
  9. Insights

    Why Soros and Icahn are Bears

    Here's why legendary investors George Soros and Carl Icahn are bearish.
  10. Insights

    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.
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. How does the strength of the IPO market affect the drugs sector?

    Discover how the strength of the IPO market affects the drugs sector. A strong IPO market reflects healthy risk appetites ... Read Answer >>
  4. 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 >>
  5. 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 >>
  6. 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 >>
Hot Definitions
  1. Federal Direct Loan Program

    A program that provides low-interest loans to postsecondary students and their parents. The William D. Ford Federal Direct ...
  2. Cash Flow

    The net amount of cash and cash-equivalents moving into and out of a business. Positive cash flow indicates that a company's ...
  3. PLUS Loan

    A low-cost student loan offered to parents of students currently enrolled in post-secondary education. With a PLUS Loan, ...
  4. Graduate Record Examination - GRE

    A standardized exam used to measure one's aptitude for abstract thinking in the areas of analytical writing, mathematics ...
  5. Graduate Management Admission Test - GMAT

    A standardized test intended to measure a test taker's aptitude in mathematics and the English language. The GMAT is most ...
  6. Magna Cum Laude

    An academic level of distinction used by educational institutions to signify an academic degree which was received "with ...
Trading Center