The stocks people buy and hold in their brokerage accounts are generally stocks that are listed on a public exchange, like the New York Stock Exchange or Nasdaq. There are rules that companies have to follow to trade on public exchanges, and there are financial requirements that need to be met. When this doesn't happen, it's possible for a stock to become delisted. This means it's removed from a public exchange.
This doesn't automatically mean that the stock in question is worth nothing, and that you can't still trade it. But delisted stocks tend to see their value drop, and in many cases, quickly. And trading them can become complicated. So if you own shares of a company you think might get delisted, you may want to sell them before that happens.
Why do companies get delisted?
Stock exchanges set rules that listed companies must follow. Failure to follow those rules could lead to a stock getting delisted. For example, failing to file certain financial reports could be grounds for getting delisted.
There are also financial requirements that companies need to adhere to. For a stock to stay listed on the Nasdaq, for example, it must have a $1 minimum share price. It also has to adhere to one or more of the following:
- Have a market capitalization of at least $50 million (which is measured by stock price multiplied by shares outstanding)
- Have total assets and revenue of at least $50 million
- Have shareholders' equity total at least $10 million
Keep in mind that some companies can actively seek to be delisted. This could happen if they decide they want to become privately held.
What to do if a stock of yours gets delisted
When a stock gets delisted, its value isn't automatically wiped out. But often, stocks get delisted when companies find themselves in bankruptcy or on the verge of it. And that has the potential to render your stock worthless, or worth very little.
Also, once a stock is delisted, it's possible to buy and sell shares in what's known as the over-the-counter market. This means those shares trade through private brokers.
It's generally best to try to sell your shares before a company gets delisted. So if you own shares of a given company and there are rumors of a near-term bankruptcy filing, that should signal to you that a delisting of that stock may be in the cards. And in that case, it may be a good idea to sell your shares before that happens.
As an example, you might remember Sears, the once-beloved department store that ran into tough financial times. Sears was delisted in late October 2018. Its final share price before its Nasdaq delisting was $0.36 a share. Just a week or so prior, Sears had filed for bankruptcy.
Can a delisted stock get relisted?
It's certainly possible. But it also doesn't tend to happen all that often. For a company to get relisted, it would need to solve the issues that led it to get delisted. But since those issues are often financial in nature, that's not always possible.
For example, many companies file for bankruptcy and close up operations. So in that case, a relisting is unlikely.
It's not always possible to predict when a company will get delisted. But if you keep tabs on your investments, it's a situation you might be able to get ahead of.
Of course, if you're worried about the idea of having stocks you own delisted, you could opt to load your portfolio with broad market ETFs instead. Although it's possible for ETFs to get delisted, too, if you own shares of something like an S&P 500 ETF, that may be less likely to happen, since in this case, you're tracking a giant index instead of investing in a single company.
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FAQs
When a stock is delisted for failing to meet requirements, it doesn't just disappear. Instead, it begins to trade on the over-the-counter (OTC) market, which is a less-centralized network of stock dealers that facilitate transactions of stocks that aren't listed on major exchanges (e.g., penny stocks).
Is a stock worthless if delisted? ›
You don't automatically lose money as an investor, but being delisted carries a stigma and is generally a sign that a company is bankrupt, near-bankrupt, or can't meet the exchange's minimum financial requirements for other reasons. Delisting also tends to prompt institutional investors to not continue to invest.
What happens when a stock is delisted in Robinhood? ›
Delisting is when a stock is removed from an exchange. Here's what can happen if a security you own becomes delisted: The security's margin requirement can change. Because the security no longer trades on the same exchanges, a national best bid and offer (NBBO) no longer exists.
Can a stock be delisted immediately? ›
Delisting of a company can either happen voluntarily or involuntarily. You must know that voluntary delisting doesn't necessarily devalue your shares, but compulsory delisting might decrease the value of the shares.
How do you dispose of delisted stocks? ›
If the security cannot be sold in the market, it may be possible to dispose of the worthless security by gifting it to another person who can be related or unrelated to you. If you gift the worthless security to a family member, you will need to ensure that the person is not your spouse or minor child.
How do you value delisted shares? ›
How Are Unlisted Stocks Valued?
- Book Value Approach. ...
- Method of Last Transaction Price. ...
- Discounted cash flow method or price to earnings ratio. ...
- Value of Net Assets (NAV) Including Goodwill. ...
- Value of Net Assets (NAV) Excluding Goodwill.
Involuntary Delisting
In this case, promoters are required to buy back the shares at the value determined by an independent evaluator. Though delisting does not affect your ownership, shares may not hold any value post-delisting. Thus, if any of the stocks that you own get delisted, it is better to sell your shares.
Can you claim loss for delisted shares? ›
As explained above, technically and legally you can claim capital loss on delisted shares only on extinguishment of your rights in shares as extinguishment is treated as transfer but there are practical difficulties when your try to fill up your ITR form for claiming such losses.
How do you realize loss on a delisted stock? ›
You may not discover that a stock has become worthless until after you've filed your tax return for the year of worthlessness. In that case, you can amend your return for that year to claim a credit or refund due to the loss.
What happens when a stock becomes untradeable? ›
If you have an open position on a stock that delists and is in liquidation, we'll close your position at a level of zero and typically open a new position – called a 'proceeds line' – on your behalf which is untradeable, has no price and brings no value to your account.
How to Stay Listed. Listing requirements vary from one exchange to the next. For example, on the New York Stock Exchange (NYSE), if a security's price closed below $1.00 for 30 consecutive trading days, that exchange would initiate the delisting process.
What happens when a company stock goes to zero? ›
If a stock falls to or close to zero, it means that the company is effectively bankrupt and has no value to shareholders. “A company typically goes to zero when it becomes bankrupt or is technically insolvent, such as Silicon Valley Bank,” says Darren Sissons, partner and portfolio manager at Campbell, Lee & Ross.
Should you keep a delisted stock? ›
Once a stock is delisted, stockholders still own the stock. However, a delisted stock often experiences significant or total devaluation. Therefore, even though a stockholder may still technically own the stock, they will likely experience a significant reduction in ownership.
How to get money from delisted stock? ›
If you still hold shares after they are delisted, you can sell them—just not on the exchange on which they traded before. Stock exchanges are very advantageous for buying and selling shares. When they delist and trade over the counter (OTC), selling shares and getting a reasonable price for them becomes much harder.
What happens if you short a stock that gets delisted? ›
What happens when an investor maintains a short position in a company that gets delisted and declares bankruptcy? The answer is simple: The investor never has to pay back anyone because the shares are worthless.
What happens if my stock goes to zero? ›
Stock prices can fall all the way down to zero. That means the stock loses all of its value and a shareholder's earnings are typically worthless. In this case, the investor loses what they invested in the stock.
Do I lose my shares if a company goes private? ›
Once a company goes private, its shares are delisted from an exchange, and shareholders receive a cash payment in exchange for their shares. Thus, if you have equity compensation and have already exercised your options, you'll likely receive a cash payout when the deal closes.
What happens when a stock falls below $1 on the Nasdaq? ›
If a company trades for 30 consecutive business days below the $1.00 minimum closing bid price requirement, Nasdaq will send a deficiency notice to the company, advising that it has been afforded a "compliance period" of 180 calendar days to regain compliance with the applicable requirements.
