MDOR bankruptcy, total loss, and what to do now

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Topic Author
montag
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Joined: Sun Jun 03, 2012 2:24 pm

MDOR bankruptcy, total loss, and what to do now

Post by montag »

Hi all,

I am a very young investor. I was 19 when I started an trade account about two years ago. I put $8000 into various stocks (I had another 8 in a CD). I should have been more diversified but I was a risk taker and it was the bottom of the recession so all I could see were dollar signs because stocks had been at decade lows. I bought $2100 worth of shares of the company MDOR, $1500 worth of AMTY, and the rest Citigroup. All have come down and I have continued to hold onto them but MDOR went bankrupt after an SEC investigation into the company for various fraud.

"Magnum made false statements to the marketplace about its growth and operations. Specifically, the Company falsely told investors, among other things, that it had $130 million in contracts for its products, and had secured $15 million in financing. The Company also failed to disclose the existence of an SEC Formal Order of Investigation into the Company – a fact Magnum appears to have hidden not only from investors but its own outside auditors, as well."

http://rigrodskylong.com/news/magnum-do ... c-mdor-pk/

I bought in in May 25, 2010 on a recommendation from a friend who was a day trader. When I told him that I lost all of my money, he said that I shouldn't sell. What should I do? What am I even holding onto now? If the company comes out of bankruptcy, will I still have the same amount of shares? And also I am a month out of the class action lawsuit. Is there anything I can do?

I was admittedly naive about this, and now own an IRA and a more diverse portfolio. Does anyone have any advice?
gsmith
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Re: MDOR bankruptcy, total loss, and what to do now

Post by gsmith »

In a bankruptcy, there's an priority of creditors:
IRS
Employee Wages
Secured Creditors
Unsecured Creditors
Preferred Stockholders
Common Stockholders (You)

If there's no money left, the next tier gets nothing. You're entitled to whatever's left over, which is very speculative.
Chances you'll get a capital loss in the year they became worthless. (You have to take the loss in the year they became worthless)

You'll be lucky is you see $10 from the class action. Focus on your existing portfolio and write this off.
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FrugalInvestor
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Re: MDOR bankruptcy, total loss, and what to do now

Post by FrugalInvestor »

Important lesson (hopefully) learned.

Thank your lucky stars that you were so young when this happened and that it was a relatively small amount of money. Imagine if you had done this with a much larger portfolio later in life!

Use the experience positively to put together a sound investment plan with a reasonable asset allocation, good diversification and low costs.
Have a plan, stay the course and simplify. Then ignore the noise!
Topic Author
montag
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Re: MDOR bankruptcy, total loss, and what to do now

Post by montag »

So can I declare this as a loss on my taxes? This happened in 2010, I don't know if it is too late.
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grabiner
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Re: MDOR bankruptcy, total loss, and what to do now

Post by grabiner »

montag wrote:So can I declare this as a loss on my taxes? This happened in 2010, I don't know if it is too late.
If the stock was worth something at the start of 2010 and was worthless at the end of 2010, then you have a capital loss in 2010, and you should file an amended tax return for 2010 to claim that loss; similarly, if it became worthless in 2011, you should file an amended return for 2011. If the loss results in a lower tax bill, you will get a refund from the IRS with interest.
Wiki David Grabiner
staythecourse
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Re: MDOR bankruptcy, total loss, and what to do now

Post by staythecourse »

Congrats you had an excellent real life lesson in what systematic and unsystematic risks are all about. The sad thing is even by taking the huge company risk of single stock investing you don't even get compensated with a higher expected return. The lesson you learned is one that unforunately MANY, MANY, MANY older and supposed wiser investors/ speculators do every day.

Now you know why company risk is bad and luckily it is the EASIEST of all the risks to avoid by simply holding a mutual fund/ ETF.

Good luck.
"The stock market [fluctuation], therefore, is noise. A giant distraction from the business of investing.” | -Jack Bogle
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BL
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Re: MDOR bankruptcy, total loss, and what to do now

Post by BL »

You have tried the excitement of a few single funds. Now how about going to the other extreme of trying a single all-inclusive fund like one of Vanguard's Total Retirement, a balanced fund, or Life Cycle funds with the Asset Allocation you prefer (yes, it may not be tax-efficient in a taxable account.). Of course you would do well to check the Wiki here for information and books to read as well as fund selections such as the 3-fund or other suggestions. You can also ask advice here on this board if you follow the suggested format. This may be your lucky day if you learn something about investing that could save you tons of money in the future.

You have 3 years to file an amended income tax return so be sure to get it done in a timely manner.
RenoJay
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Re: MDOR bankruptcy, total loss, and what to do now

Post by RenoJay »

When I was about 20, I took a tip from a broker and invested $2,000 (about 10% of my life savings at the time) into some stock I knew nothing about. It went to zero, and I wanted to kill the broker. In hindsight, it was one of the best lessons I ever learned about doing my own research and independent thinking and always looking at the other guy's motivation. Now I'm 40 and worth millions. You'll get past this. Just make sure to learn the lesson, then let the bad feelings go.
Mill
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Re: MDOR bankruptcy, total loss, and what to do now

Post by Mill »

A lot of us have been through this, and its best to acknowledge the mistake, and calmly let it go. I still own about a dozen different penny stocks in my old daytrading account, each worth a fraction of a cent, or zero. I keep these around as a reminder of my arrogance in case I ever get the urge to daytrade. :D
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rob
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Re: MDOR bankruptcy, total loss, and what to do now

Post by rob »

Mill wrote:A lot of us have been through this, and its best to acknowledge the mistake, and calmly let it go. I still own about a dozen different penny stocks in my old daytrading account, each worth a fraction of a cent, or zero. I keep these around as a reminder of my arrogance in case I ever get the urge to daytrade. :D
Mine was called WorldCom - valuable lesson. Move on and claim the loss and keep it as a reminder.
| Rob | Its a dangerous business going out your front door. - J.R.R.Tolkien
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