What happens when share price drops to 0?

[Simon Bags]

Morning. Quiet a while back I bought some shares in St. James's Place. They grew pretty much year on year, paid out some good dividends and generally all going well. However, I think we all know what's happened to them over the last 12 months or so and it's been a disaster ever since (I think on one day their share price dropped by 18%, nice). Prices drop between 1 - 2% most days and so I'm wondering, what happens when they drop so much, the share price actually reaches 0?. Can it reach 0? If it does, is it all over for the Company?

Pointless me selling so it's just a question I've been mulling over.

Cheers, Simon.

[Simon Bags]

NowWatchThisDrive said:

Practically, unless the company fails (insolvency and liquidation), it's not going to happen. The stock becomes worthless because the company is worthless, not the other way around.

Aha. Got it. Just hope they Manage to turn it around as it's quite scary watching it drop, and drop, day after day.

Cheers for the reply.

Simon.

[Jawls]

Simon Bags said:

Morning. Quiet a while back I bought some shares in St. James's Place. They grew pretty much year on year, paid out some good dividends and generally all going well. However, I think we all know what's happened to them over the last 12 months or so and it's been a disaster ever since (I think on one day their share price dropped by 18%, nice). Prices drop between 1 - 2% most days and so I'm wondering, what happens when they drop so much, the share price actually reaches 0?. Can it reach 0? If it does, is it all over for the Company?

Pointless me selling so it's just a question I've been mulling over.

Cheers, Simon.

Why is it pointless you selling?

[The Ferret]

Simon Bags said:

Aha. Got it. Just hope they Manage to turn it around as it's quite scary watching it drop, and drop, day after day.

Cheers for the reply.

Simon.

It shouldn't be scary. In fact quite the opposite, it should be an opportunity to acquire more at a cheaper price.

If you wince at that thought then it might be a good time to reconsider your reasons for continuing to hold the shares.

You clearly thought they were good value for money when you bought them, and by the sounds of they were for a while. Do you consider them to be good value for money now at the current share price (i.e. if you'd never invested in them originally, would you be looking to invest in them now at the current price)? If not, you have to question why you continue to hold them now. I appreciate nobody wants to sell when prices are down, but if you believe they aren't currently good value you're cutting off your nose to spite your face continuing to hold them.

[ferret50]

Commercial investor buys low and sells high....

Retail investor buys high and sells low.....

[Simon Bags]

Jawls said:

Why is it pointless you selling?

Because I think they're worth less now than when I bought them.

[Simon Bags]

The Ferret said:

It shouldn't be scary. In fact quite the opposite, it should be an opportunity to acquire more at a cheaper price.

If you wince at that thought then it might be a good time to reconsider your reasons for continuing to hold the shares.

You clearly thought they were good value for money when you bought them, and by the sounds of they were for a while. Do you consider them to be good value for money now at the current share price (i.e. if you'd never invested in them originally, would you be looking to invest in them now at the current price)? If not, you have to question why you continue to hold them now. I appreciate nobody wants to sell when prices are down, but if you believe they aren't currently good value you're cutting off your nose to spite your face continuing to hold them.

I have thought about buying more, at the price they're at, but buying and selling shares isn't really something I'm that aquianted with. Plus I'm a bit scared.

[ATG]

Simon Bags said:

Jawls said:

Why is it pointless you selling?

Because I think they're worth less now than when I bought them.

That is irrelevant. That's already happened. The only question is what you think is going to happen to the share price in the future. If you think it is going to recover, you hold or buy more. If you think it is going to fall further, you sell.

[croyde]

Good point.

I bought Rockhopper Oil years ago at around £4 a share.

Now about 10p each.

I haven't sold as I'm still thinking one day I will get my money back, thus I should buy loads more at their current low price

[ferret50]

croyde said:

Good point.

I bought Rockhopper Oil years ago at around £4 a share.

Now about 10p each.

I haven't sold as I'm still thinking one day I will get my money back, thus I should buy loads more at their current low price

If you buy loads more now at 10p/share, your average price per share will fall, so you will not lose quite as much money, but only if the price rises after you have bought.

Never works for me, though, I just end up throwing good money after bad!

[boyse7en]

The Ferret said:

Simon Bags said:

Aha. Got it. Just hope they Manage to turn it around as it's quite scary watching it drop, and drop, day after day.

Cheers for the reply.

Simon.

It shouldn't be scary. In fact quite the opposite, it should be an opportunity to acquire more at a cheaper price.

If you wince at that thought then it might be a good time to reconsider your reasons for continuing to hold the shares.

You clearly thought they were good value for money when you bought them, and by the sounds of they were for a while. Do you consider them to be good value for money now at the current share price (i.e. if you'd never invested in them originally, would you be looking to invest in them now at the current price)? If not, you have to question why you continue to hold them now. I appreciate nobody wants to sell when prices are down, but if you believe they aren't currently good value you're cutting off your nose to spite your face continuing to hold them.

It does depend on the value of your holding though. If it has dropped to a certain point there is no point in selling the shares.

About 30 years ago I bought some shares at around 40p per share. Over the next year or so they rose to around 90p, before some bad news abruptly hit the prices and they dropped to something like 6p per share. I didn't think it was worth selling for the £150 they were then worth, so held on to them and basically forgot them for 15 years. Then i got a letter saying they were being bought out by a rival for £2.50 per share... Nice little bonus.
It also proved i knew sod all about share dealing so i stopped doing it

[rdjohn]

Shares rarely get to zero, once the the value becomes worth less than the assets someone tends to arrive and buy them.

They are currently worth a lot more than they were after the financial crisis. As others say, its either time to cut your losses, or buy more.

[steve_n]

Shares do sometimes get declared worthless and then simply delisted. I've had stocks disappear from my portfolio when this happens. Whether that's SJP's destiny is perhaps unlikely but they need to have a rethink.

[oldaudi]

Yeah, me too Weatherly International (they eventually came back) , Motive Television and Sirius Minerals. What tends to happen with the bottom end AIM stocks is that they release more stock to pay their debts and salary and then one day at 7am you’ll get a nice RNS to say trading suspended and delisted, ta ra!

Edited by oldaudi on Tuesday 28th November 22:14

[VR99]

My first foray into investing was AIM miners..probably the worse place to start but in hindsight learnt some painful lessons early on. At the time it was essentially gambling, made a lot of gains quickly then lost it and more even quicker.

That was over 15 years back and I haven't touched shares since, all my investments are funds/ETF's and mainly passive.....happy to continue that way as I am a 'lazy' investor and don't have the time or currently the ability to research, monitor, pick shares and then ongoing management for a portfolio. Nothing wrong with investing in shares if you know what you are doing and understand the risks (emphasis on latter) but funds and especially the passive variety seems to be less headache for the average retail investor.

[Jawls]

Simon Bags said:

Jawls said:

Why is it pointless you selling?

Because I think they're worth less now than when I bought them.

This is just another variant of man maths.

If you think the trajectory of the share price is negative, you get rid now.

Put it like this. Would you buy the shares at the current price, right now? If not, sell.

[BoRED S2upid]

They can go to 0.0x but to go to complete zero the company would have to go into liquidation.

[alfaspecial]

This St James' Place?
https://citywire.com/funds-insider/news/st-james-s...


If the share price is pennies, unless you have a huge investment, there is not much point selling. IMHO.

Expect the worst (de-listing), but hope for the best!




The lesson that I learned from the film "The Wolf of Wall Street" was that the spivs and middlemen make money every time that YOU buy or sell.... and so, I just don't bother entering the market speculating. Works for me. I may be poor but I sleep at night. There's something to be said for that!

Edited by alfaspecial on Wednesday 29th November 10:54

[The Gauge]

A few years ago I bought shares in Provexis, they were soaring upwards from almost nothing and I bought in @15p. They then dived to about 0.5p and so I bought a few more to lower my average buying price to around 7p. As I'd stuffed about £1k of my money into them, I held.

Fast forward quite a few years to today and they are still sitting at 0.5p!!! Not my finest hour but as I see it I won't loose a penny of my investment unless I sell. Though it has been a completely wasted investment so far!

Edited by The Gauge on Wednesday 29th November 11:30

[stichill99]

Just like my Borders and Southern Petroleum. Bought at 24p,watched them go to over £1 and then watched them drop to 0.5p! Although I did do better from Babcock Engineering. Bought at 80p and sold at £13.24 which paid for my 993 which then more than doubled in value! You win some and you lose some!