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Short summary

I bought some shares in a penny stock a few years ago, but now they don't trade and are worth $0.0001 per share. I want to get rid of them, but a) market orders don't work because the shares have no volume, b) limit orders don't work because the lowest price for a limit order is $0.0001 a share and the stock is already priced there, and c) my broker won't buy them from me, which is what the answer to the similar question says to do. How do I get rid of these shares?

Details

A few years ago, I bought about $200 worth of shares in a penny stock. The share are still listed on the OTC market, but they haven't traded in years and are practically worthless ($ 0.0001/share).

I've tried to sell them at any price (with a market order) and claim a loss that way, but they don't sell because there is zero volume. Also, I can't set a limit order for a lower price and dump them that way, because $0.0001/share is the lowest price possible for a limit order with my broker and the shares are already priced at that price point.

The answer to this question says:

Generally, to be able to write off worthless securities, you need to show that they're indeed worthless. It's not necessarily easy, as you need to prove that there's no way they will regain any value in the future.

What is usually done, instead, is very simple: you sell them. Many brokers are aware of this problem and will assist by buying these securities from you at a nominal price (E*Trade, for example, for $0.01, ScotTrade for $0.00), and providing a proper trade confirmation. This is a bona fide sale, so if the stock does regain value - it will be a profit for the broker. In this case - you just report it as a sale at loss.

Check with your broker if they support such a solution.

I contacted my broker (Fidelity), and this was their response:

We can only remove securities from your account that have been deemed worthless.

A security can be declared legally worthless only in the cases given below:

  • The bankruptcy court has declared the company bankrupt under Chapter 7 or 11
  • The company has no shareholder equity

A security cannot be declared worthless for any of the following reasons:

  • The company is currently in Chapter 7 or 11 proceedings
  • The company has no transfer agent
  • The security has no bid, but the company is still viable
  • The customer owns less than the minimum quantity to sell, set by the market maker
  • The security is held in escrow

At this time, your stock has not been coded as worthless. I apologize for the inconvenience. Once you see a "No Stockholder Equity" status on your positions page, you can have the worthless shares removed from your account.

In 2014, the stock was temporarily suspended by the SEC, so even though the suspension was lifted a few months later, it's still a good sign that it's not a worthwhile investment anymore.

Basically, the answer to the other question says that your broker can buy them from you. However this isn't true for every broker, so that answer doesn't apply to this situation at all. Does this mean there's nothing I can do?


Update

I spoke with my broker, and they said that not all companies issue physical stock certificates anymore, and for those that do, it costs $100 to get the physical certificate. The company I invested in does not, however, so there's no way to get a physical stock certificate that I can sell to a friend, shred, etc.

Summary

It appears that these shares are impossible to get rid of.

  • I can't sell them on the market because there is no volume.
  • I can't sell them to my broker for nothing (or a penny) because my broker doesn't support that.
  • I can't transfer them to another broker who will buy them because their penny stocks, and most brokers (including all of those I have accounts with) won't accept the transfer of penny stocks.
  • I can't get the physical stock certificate and sell them to a friend or shred it because the company doesn't issue physical stock certificates. Furthermore, since it appears that the company was basically a stock dilution scam, there isn't a way to contact them directly.

Yep. These shares are mine forever, or at least until the company is actually declared worthless.

  • This is a good article, bankrate.com/finance/taxes/writing-off-a-worthless-stock.aspx – NuWin Jan 18 '16 at 23:58
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    Have you tried a market order? – user9822 Jan 19 '16 at 1:53
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    @MarkDoony Yes I have but as I said originally there isn't any volume. – Henry Jan 19 '16 at 16:59
  • I'd be interested to know what your broker would do with the shares if you closed your account. Hopefully they can't forcibly keep it open forever, particularly if they keep charging you for it. – Ganesh Sittampalam May 20 at 8:21
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Your broker should be able to answer this. Many brokers will buy it from you for the cost of a commission, if there's no legit buyer.

  • I asked my broker and added their response to my question. I know this was already marked as a duplicate but the answer to the other question doesn't apply to mine because (obviously), the broker isn't willing to do a courtesy sale or anything like that. – Henry Jan 19 '16 at 22:57
  • I can't comment on the other question to ask what to do, but maybe you could? My broker won't buy the shares from me, so am I just stuck with them forever? – Henry Jan 20 '16 at 16:03
  • Hi Joe, Any comment on this? Sorry to be a bother, but since I can't comment on the other question (not enough points) and neither your answer here nor the answer there talk about what to do if the broker won't buy the shares from you, I'm kind of stuck and the information currently here isn't helpful. – Henry Jan 21 '16 at 15:06
  • Henry, I'm sorry, I have no other idea. I'd leave a market order, all or none, open, and hope it takes. – JoeTaxpayer Jan 21 '16 at 22:05
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I dug up an old article on Motley Fool and one approach they mention is to get the stock certificates and then sell them to a friend:

If the company was liquidated, you should receive a 1099-DIV form at year's end showing a liquidating distribution. Treat this as if you sold the stock for the amount of the distribution. The date of "sale" is the date that the distribution took place. Using your original cost basis in the shares, you can now compute your loss.

If the company hasn't actually been liquidated, you'll need to make sure it's totally worthless before you claim a loss. If you have worthless stock that's not worth the hassle of selling through your broker, you can sell it to a friend (or cousin, aunt, or uncle) for pennies. (However, you can't sell the stock to a spouse, siblings, parents, grandparents, or lineal descendants.) Here's one way to do it:

  1. Get the actual stock certificates from your broker.
  2. Formally sell the shares to the purchaser, with a check for payment and a bill of sale.
  3. Sign over the stock certificate (on its back) to the purchaser. Have the signatures verified by your banker and/or a local stockbroker.
  4. Send the certificate to your stock-transfer agent. Explain that the shares have been sold, and ask to cancel the old shares and issue a new certificate to the new owner.

    Some brokerages will offer you a quicker alternative, by buying all of your shares of the stock for a penny. They do it to help out their customers; in addition, over time, some of the shares may actually become worth more than the penny the brokers paid for them.

    By selling the shares, you have a closed transaction with the stock and can declare a tax loss. Meanwhile, your friend, relative, or broker, for a pittance, has just bought a placemat or birdcage liner.

  • Better answer than mine, depending on what the broker tries to charge you for all this paper-shuffling. – keshlam Jan 23 '16 at 4:01
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    I have no idea if this would work, but another thought is that you could sell your stock at the lowest possible price (put in an ask), then have a friend buy it through their broker. In other words, you'd both become the market maker for that stock... this is assuming it's on the penny stock exchange and not grey market. You might have to give your friend the ten bucks for their commission to get them to do it. Others can weigh in on this, but I think you'd be safe if you put in the ask and then your friend puts in the bid, for the same amount of stock. – user11599 Jan 23 '16 at 6:34
  • @user11599 I'm going to try the process in your answer. I tried to transfer the shares to another broker that would buy them from me, but the broker wouldn't accept the transfer because it's a penny stock. I requested the physical stock certificate through my current broker so if they're actually willing to send it to me, I'll either sell it to a friend or just shred it. – Henry Jan 29 '16 at 18:03
  • @user11599 See my update. The company doesn't issue physical stock certificates, according to my broker (not sure how they arrived at that, since it's almost impossible to contact the company), so this is a non-starter, unfortunately. Thanks! – Henry Jan 29 '16 at 19:30
  • @Henry Is the stock on an exchange, so that IF someone put in a bid, you could sell your stock? If so, just have a friend put in a bid at some low value, then you could just sell your stock on the exchange. It would cost you a commission, but that would be all. Use limit orders, so that your friend doesn't get cheated by some lurker who also holds the stock. For example, have the friend bid for exactly the right number of shares at the smallest possible price. In other words, you'd create your own liquidity. The main problem would be if there are old orders waiting. – user11599 Jan 29 '16 at 19:55
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Merrill charges $500 flat fee to (I assume purchase) my untraded or worthless security. In my case, it's an OTC stock whose management used for a microcap scam, which resulted in a class action lawsuit, etc. but the company is still listed on OTC and I'm stuck with 1000s of shares. (No idea about the court decision)

protected by Nathan L May 18 '17 at 1:13

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