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Last year I had a little extra and decided to try my hand at penny stocks. I spent the $200 on shares in 5 different companies trading for under $1 a share, ranging from $20-$80 total per company. I thought I fully understood the risks (worst case and honestly most likely scenario, the companies would declare bankruptcy and I'd lose my investment)

Unfortunately, one did go bankrupt (DNR), but instead of just losing the $40 worth of shares I bought, I was also charged a $38 "Mandatory Reorganization Fee", which basically doubled the loss for that investment. I searched and saw other posts here talking about a reorg fee for a reverse split (which one of my other investments also had) but I hadn't seen anything about a fee for when a company goes bankrupt.

Is it typical to be charged this fee if a company goes bankrupt? If so, I could be out double my initial investment, or more if the companies do one or more reverse splits and still go bankrupt.

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  • Does this answer your question? What does a reorganization fee that a company charges get applied to?
    – glibdud
    Oct 2 '20 at 18:32
  • @glibdud No, I found that question when I first searched, but that's in reference to reverse stock splits, which I am already aware of. My question is in related to a company declaring bankruptcy, not doing a reverse split Oct 2 '20 at 18:38
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    Some brokers charge a Mandatory Reorganization fees when there is a reverse split, a mandatory cash merger and for some share exchanges. Oct 2 '20 at 19:11
  • @BobBaerker Which of those would bankruptcy fall under? Oct 2 '20 at 19:43
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    The best thing to do would be to call your broker if you want clarification as to why they charged you this fee. Oct 2 '20 at 19:46

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