DEFINITION of ‘Scrap Paper’
Stock certificates that have become worthless. When a company becomes bankrupt, in most instances, the value of shareholders’ equity will approach zero. For shareholders with the physical stock certificate, they essentially become as valuable as “scrap paper”.
BREAKING DOWN ‘Scrap Paper’
Because creditors are paid before stockholders in bankruptcies, typically all physical stock certificates of a bankrupt company become scrap paper.