Halted trading

Q: If trading is halted for a stock, what does that mean?— O.P., Charleston, S.C.

A: Trading can be halted or delayed for several reasons. For example, there may be some headline news pending, such as an announcement about a merger or restructuring, a big change in management, a major legal development or significant good or bad news regarding the company’s products. The halt — typically less than an hour, but sometimes longer — can give investors time to digest the news before making any buy, sell or hold decisions. The market may also delay trading in a stock if there’s a considerable imbalance between buy and sell orders for it.

Trading may also be halted if it looks like the company may no longer qualify to be listed on the exchange (perhaps its stock price has fallen to a certain level). And trading may be suspended for days if it appears that a stock is being manipulated.

Q: If I own, say, 1 percent of a company’s stock, and it earns $100 million in a quarter, do I get 1 percent of that, or $1 million? — B.L., Santa Rosa, Calif.

A: Not exactly. Shareholders are indeed part owners of companies, but they don’t get a direct share of their earnings. Instead, they benefit from owning a stock because as the company grows in value (due to increasing sales and earnings), the stock price also tends to grow in value — as investors will be willing to pay more for shares.

Shareholders are rewarded directly when dividendpaying companies send them a portion of earnings on a regular basis. They can also benefit when companies repurchase shares, as that reduces the share count, making each remaining share more valuable.