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Whiting Petroleum is currently in chapter 11 restructuring.

If the restructuring plan is agreed, existing stock holders will get a 3% stake in they call "new common stock" and bond holders etc. will get a 97% in new common stock. (Restructuring plan https://cases.stretto.com/public/X059/10187/PLEADINGS/1018706302080000000068.pdf ... search for "common stock").

My question is, what happens to the old common stock and the options that are based on it? Are there going to be trading in old common stock and new common stock for some time?

Will there be a new ticker symbol for the new common stock (let's say NWLL) and the old common stock goes over to the pink sheets and the options continue to operate based on whatever price they old stock trades there?

Or will the price/ratio be adjusted according to the dilution (let's say technically this will a bit like a 100:3 stock split) plus issuance of new shares?

Also, assuming you sold calls, upon being called, you would be required to deliver old and new stock?

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If there is a corporate restructuring, the old shares will be gone. The new shares will continue to trade on the exchange where they are currently listed if the company meets listing requirements or they may be delisted and will head for the Pink Sheets.

If the company is able to remain listed on the current exchange, its symbol will likely remain the same but that's not guaranteed.

All existing options will be adjusted to reflect the terms of the corporate restructuring.

Here is a general reference guide that depicts various option adjustments due to a corporate event. The OIC and OCC also provide explanations about option adjustments.

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  • I think it is likely they will remain listed (they are still trading on NYSE even though they are in bankruptcy proceedings). Looking at the reference guide, I guess the most likely scenario will be this will be treated like a merger and acquisition case. So the option price will probably remain the same but the underlying will change to delivery of new common stock in whatever ratio will be applied (e.g. deliver 3 new instead of 100 old).
    – Anachronism
    Aug 8 '20 at 14:34
  • In order to remain NYSE listed, they are going to have to meet the exchange's listing requirements. Don't assume that because existing stock holders will get a 3% stake in they call "new common stock" then you will get 3 shares per 100 shares owned. The link states that A and B warrants will be issued along with New Common Stock (see page 26). There are multiple variables in this reorganization and until they finalize the deal, it's utter speculation. One thing that you can be sure of is that the option adjustment won't be a simple one like when there's a forward or reverse split.
    – Bob Baerker
    Aug 8 '20 at 15:46
  • I'm aware that it's not as easy as 100:3 bc it depends on how many new stock they issue (they will probably issue less than currently in order to come back with a higher stock price). The 100:3 was just an example for simplicity. The strike for the warrants will also be interesting, bc they need to have an idea for what the new stock will be trading (probably something based on a market cap that is based on the class 5 debt).
    – Anachronism
    Aug 9 '20 at 11:41
  • Accepting this as answer bc the link gave me the best idea of what will most likely happen.
    – Anachronism
    Aug 9 '20 at 11:45
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From the document you linked

All Existing Interests shall be canceled on the Effective Date and Reorganized Whiting Parent shall issue the New Common Stock, the New Warrants-A, and the New Warrants-B to Holders of Claims and Interests entitled to receive the New Common Stock, the New Warrants-A, and the New Warrants-B, as applicable, pursuant to the Plan in the proportions set forth in the Plan.

There will ne "New Common", but no "Old Common".

The options will be adjusted. The best way to think of it is this - (But note, my experience is just that, what I've observed, not quite stating a certainty here) - If one entered into a covered position, one wouldn't suddenly find themselves in a completely different set of risk/reward. e.g. You owned 100 shares, and were short a call at $5. Post transaction, I expect that you own 3 shares, are still short the call, but at an adjusted strike. Far out of the money. Keep in mind, shareholders just lost 97% of their equity to the bond holders.

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  • Looking at the reference guide from the other answer, I guess the most likely scenario will be this will be treated like a merger and acquisition case. So the option price will probably remain the same but the underlying will change to delivery of new common stock in whatever ratio will be applied (e.g. deliver 3 new instead of 100 old).
    – Anachronism
    Aug 8 '20 at 14:35
  • Yes, but as with any split, to the positive or a reverse split, the strike has to be adjusted as well. Consider, an Apple option at $200 now is well in the money. Post split, the shares will be closer to $110. And those options, $50 new strike. Curious what date/strike you sold. (If the answers helped, please 'accept' one. Bob's gave you the useful doc, I just went on talking.
    – JTP - Apologise to Monica ♦
    Aug 8 '20 at 15:06
  • I don't think this will be split-like. Some number of new shares (3 in my example but it could vary, see my comment in the other answer) are exchanged for old. Actually I didn't sell options, I am just generally interested (I might buy puts). I am actually short the stock though.
    – Anachronism
    Aug 9 '20 at 11:44
  • I upvoted both answers already, but it doesn't show bc. I need 15 credits myself in order to be able to upvote.
    – Anachronism
    Aug 9 '20 at 11:45
  • My point, hopefully Bob will verify, a covered call should remain in tact, i.e. the right of the call buyer should reflect the new position of the seller, whether the seller has new shares, money, new stock, or a combination of both. Thanks for disclosing the info, we'll see soon enough what the options do.
    – JTP - Apologise to Monica ♦
    Aug 9 '20 at 12:35

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