WARREN - Stockholders with shares of the now-bankrupt First Place Financial Corp. saw the shares that once were trading at nearly $20 close Thursday at 7 cents a share.
The dip was the lowest the stock, already delisted a year ago from the Nasdaq, had fallen, and until Monday's Chapter 11 bankruptcy filing, the stock had been trading at around 75 cents per share.
But even at 7 cents, the shareholders could face losing more, perhaps everything, as the Warren-based holding company proceeds through the federal bankruptcy process.
According to federal bankruptcy rules, payment is made first to secured creditors, then to unsecured creditors. If there are any funds left, a final payment is paid per share to the stockholders.
First Place Financial Corp., the holding company for First Place Bank and First Place Holdings Inc., plagued with the inability to raise sufficient capital, announced Monday it had filed for bankruptcy and also had entered a purchase agreement with Michigan-based Talmer Bancorp. to take over the First Place banks.
According to court filings and records filed June 30 with the Federal Reserve System, the central bank of the U.S., First Place was operating with $2.65 billion in assets and $2.54 billion in liabilities, for a balance of $105.37 million. The balance would first be used to pay back $62 million owed to First Place's primary creditors and any other secured loans, along with payback of federal Troubled Asset Relief Program, or TARP funds, totaling about $73 million that the bank obtained in 2009.
If approved, Talmer will purchase the Warren bank for $45 million. Talmer is a privately held company, not publicly traded, meaning First Place would become a privately held institution, First Place spokeswoman Debra Bish said.
The website for the Securities and Exchange Commission, the agency charged with protecting investors, maintaining fair and efficient markets and facilitating capital formation, points out that stockholders, or owners of the company, have the last claim on assets and may not receive anything if the secured and unsecured creditors' claims are not fully repaid.
That could leave hundreds of bank shareholders with nothing.
Still, the bank's shares may continue to trade. Even when a company is delisted from one of the major stock exchanges, the Nasdaq in this case, the company's shares may continue to trade on over-the-counter markets. No federal laws prohibit trading of securities of companies in bankruptcy, according to information explained on the SEC web site.
The SEC warns that investors should be cautious when buying common stock of companies in Chapter 11 bankruptcy.
''It is extremely risky and is likely to lead to financial loss. Although a company may emerge from bankruptcy as a viable entity, generally the creditors and the bondholders become the new owners of the shares,'' information listed on the agency's website explained.
''In most instances, the company's plan of reorganization will cancel the existing equity shares. This happens in bankruptcy cases because secured and unsecured creditors are paid from the company's assets before common stockholders. And in situations where shareholders do participate in the plan, their shares are usually subject to substantial dilution.''
If the company emerges from bankruptcy, there may be two different types of common stock, with different ticker symbols, trading for the same company. If the old common stock is traded on the over-the-counter markets, it will have a five-letter ticker symbol that ends in "Q," indicating that the stock was involved with bankruptcy proceedings, the SEC said.
The agency warned potential buyers to be sure to know which shares they are purchasing. Old shares that were issued before the company filed for bankruptcy may be worthless once the company has emerged from bankruptcy and has issued new common stock.
First Place's ticker symbol is now listed as FPFCQ. The Q was added to signify the company is bankruptcy.