Bagel Land: Understanding Securities Approaching Zero Value

What Is Bagel Land?

"Bagel land" is a slang term that refers to a stock or other type of security that is approaching zero ($0.00) in price. The name is derived from the fact that the $0.00 price tag resembles the round shape of the center of a bagel. 

This term is typically reserved for assets that used to have a higher valuation, as opposed to a penny stock or security that has a history of being sold very cheaply.

Key Takeaways

• "Bagel land" is slang for a security whose price appears to be approaching zero.
• Typically reserved for assets that used to have a higher valuation, Bagel Land is not often used to refer to penny stocks or other securities that have long traded for low valuations.
• A bagel land stock is typically not available for purchase through regular channels and may begin trading elsewhere such as on over-the-counter (OTC) venues.

Understanding Bagel Land

"Bagel land" is a colloquial term for a historically valuable stock that is approaching a $0 price tag, typically as a result of business issues. For example, suppose a stock was trading at $10 per share when you purchased it. However, due to adverse earnings and poor business conditions, its price dropped to $0.30 in the six months after you made the purchase. You could refer to this stock as having "gone to bagel land".

If an asset is approaching $0, investors generally feel that the security is worthless. In many cases, a company may be nearing bankruptcy or facing major solvency issues. While returning from so-called "bagel land" is possible, the likelihood that equity investors will lose all of their stake in the company is very high.

A bagel land stock is typically not available for purchase through regular channels and may begin trading elsewhere. This is because a stock that is approaching a $0.00 price may have dropped below a certain price threshold that makes it eligible for trading on an exchange. For example, the New York Stock Exchange (NYSE) has a $4.00 minimum trading price requirement for stocks. Once a stock declines below that threshold, it cannot be purchased through direct channels on the exchange.

Example of Bagel Land

Paragon Offshore Limited was a provider of offshore drilling rigs. The company's earnings were therefore closely tied to the health of the oil industry. When oil prices have rallied, Paragon's stock price had also risen. But the stock has also experienced downfalls concurrently with slumps in the oil industry. In 2011, Paragon's stock was trading at $56.41.

During this period, the Brent Crude oil benchmark crossed $100 per barrel price for the first time. When the price of oil then plummeted in 2016, Paragon's business suffered in turn. It was forced to file for bankruptcy in 2016. Its stock price, which had been cratering, headed into bagel land soon afterward.

Shares of Paragon were subsequently delisted and only traded on OTC Markets for as little as $0.69. After Paragon restructured its business, it was acquired by Borr Drilling Limited (BDRILL) for $2.3 billion in February 2018.