Can Stock Value Be Negative?

Stocks are a volatile investment. Their prices can skyrocket or plummet just as quickly. Even stocks that are relatively stable carry risk. Stock prices can fall to very low levels in extreme cases, but they can never be negative. As an investor, the worst thing that can happen is losing everything you invested in stock -- but you'll never need to pay more than that.

Stock as Ownership

No matter how complex the stock market may be, stocks simply represent shares of ownership in a company. Whatever investors perceive the value of the company to be, that determines stock price. When investors see the value as being very low, the price will fall, sometimes to $1 or less. Stocks with very low price are known as "penny stocks." However, a stock can never fall to a negative value. A value of zero indicates that no investor is willing to buy the stock, no matter how low the price.

Bankruptcy

A company's stock price is likely to sink to its lowest levels if the company goes through bankruptcy. There are different types -- but in general, bankruptcy occurs when a company's debts are greater than the value of its assets. Creditors are forced to accept less than they are owed, and stock price can fall to zero, leaving investors with worthless shares. Even if a company emerges from bankruptcy, its old shares will have no value, positive or negative.

Losses

Just because a stock can't have a negative value doesn't mean that it can't represent a loss for an investor. Losses are drops in stock value during the time an investor owns shares. Selling stock for $100 per share still represents a loss if you paid more than that. A company can also have negative earnings and a number of other negative financial metrics that don't indicate a negative share value.

Value to Investors

Stock sold at a loss, or lost when its value falls to zero, can still have positive value for investors. This is because losses from stock market investing can be claimed as capital losses for income tax purposes. Capital losses offset capital gains, which are profits from stock and some other investments. They essentially allow stock profits to be untaxed, saving money that would otherwise be paid upon cashing in on a winning investment.

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