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Retail Traders Flout Legal Logic by Buying Up Bankrupt Stocks

  • Chapter 11 protection is no obstacle for some jubilant traders
  • Equity owners often receive no recovery in bankruptcy
Hertz Gets Lenders' Forbearance In Bid To Avert Bankruptcy
Photographer: David Paul Morris/Bloomberg
Updated on

Investors are piling into stocks of bankrupt companies, wagering against a court process that routinely wipes out shareholders.

Car renter Hertz Global Holdings Inc., oil driller Whiting Petroleum Corp. and retailer J.C. Penney Co. are among companies that have seen their shares more than double in recent trading sessions despite being in Chapter 11 bankruptcy, a process that allows companies to keep operating while working out a plan to repay creditors.