Delisting is a financial term describing a phenomenon where alisted securityis actively removed from the exchange on which it trades. While there are many reasons behind such action, it most frequently occurs when the company for which the stock is issued fails to comply with agiven exchange's listing requirements. Most major exchanges exhibit similar delisting rules and compliance processes.
- Delisting is a term describing the process of a company becoming removed from the exchange it trades on.
- A company's stock may be delisted as the result of failing to meet the exchange's laundry list of requirements.
- The listing criteria include maintaining trading price thresholds for certain time frames, minimum revenue standards, market capitalization thresholds, and shareholder percentage requirements.
- Companies in breach of an exchange's listing mandates are initially sent non-compliance notifications affording them certain windows of time to address these issues before they're ultimately delisted.
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. Furthermore, the major exchanges also impose requirements related to market capitalization, minimum shareholders' equity, and revenue outputs. From a bookkeeping perspective, public companies must stay current with paying exchanges their annual listing fees due, while dutifully covering the significant legal and compliance costs associated with listing on an exchange.
A delisted company may still trade its stock over two different platforms: the Over-the-Counter Bulletin Board (OTCBB) or the pink sheets system, although both are significantly less regulated than the major exchanges, causing many investors to shy away from investing in such equities.
What Happens to Non-Compliant Companies
A company that fails to maintain the terms imposed by the exchange on which it lists its stock receives a perfunctory non-compliance notification letter. But a company's stock is not immediately evicted from the exchange at that time. Rather, the letter serves as an invitation for the offending corporation to reply with a description of the actions it plans to take toward addressing the delinquencies in question. If the exchange accepts the terms of the remedial plan, it will monitor the company's financial progress to ensure its milestones are met in a timely manner. But if a company fails to respond within 10 business days of receiving a notification letter, the exchange would swiftly proceed with the delisting process.
Tracking Delisted Companies
Investors may track non-compliant companies by following the lists of delinquent securities regularly published by the exchanges. Wall Street watchers can likewise directly identify non-compliant companies by checking out their stock ticker symbols. If a ticker has the initials "BC" attached to the end of it, the stock is designated as non-compliant. But such companies may continue trading normally on the exchange as they cycle through their probationary periods.
FAQs
A company's stock may be delisted as the result of failing to meet the exchange's laundry list of requirements. The listing criteria include maintaining trading price thresholds for certain time frames, minimum revenue standards, market capitalization thresholds, and shareholder percentage requirements.
What are the criteria for delisting a stock? ›
If a company can't maintain the minimum requirements to remain listed, Nasdaq will delist it. Failure of a company to meet a minimum closing bid price of at least $1 for 30 consecutive trading days can trigger delisting. When this happens Nasdaq issues a deficiency notice to the company.
Do I lose my money if a stock is delisted? ›
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. You can either exit the market or sell it to the company when it announces buyback.
What is the process of delisting shares? ›
Eligible shareholders receive a public announcement and a bidding form. As a shareholder, you can exit by tendering your shares, with the final price determined by the maximum offered share price. Once the specified limits are reached, the delisting is deemed successful; otherwise, the company remains listed.
Can a stock be listed after being delisted? ›
It is rare that a delisted stock will get itself back on to the more traditional exchanges. To do so, it would have to avoid bankruptcy, solve the issue that forced the delisting, and again become compliant with the exchange's standards.
How long can a stock stay under $1 before delisting? ›
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.
How long does a stock have before delisting? ›
The criteria for delisting depend on the exchange and which listing requirement needs to be met. For example, on the Nasdaq, the delisting process is set in motion when a company trades for 30 consecutive business days below the minimum closing bid price requirement or less than the required market value.
How do you sell a delisted stock? ›
The corporation must honour the delisting price. If the firm has been delisted for more than a year, the shareholder might approach the company and negotiate a private sale of the shares to the promoters. This will be an off-market transaction, with the price agreed upon by the seller and buyer.
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.
What to do if there are no buyers for a stock? ›
When there are no buyers, you can't sell your shares—you'll be stuck with them until there is some buying interest from other investors. A buyer could pop in a few seconds, or it could take minutes, days, or even weeks in the case of very thinly traded stocks.
Companies have 10 days on the New York Stock Exchange (NYSE) to respond to a notification letter from the exchange. Failure to respond can result in delisting procedures which is on a case by case basis but can range from one to seven months.
What is the Nasdaq $1 dollar rule? ›
Under certain circ*mstances, to ensure that the company can sustain long-term compliance, Nasdaq may require the closing bid price to equal or to exceed the $1.00 minimum bid price requirement for more than 10 consecutive business days before determining that a company complies.
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.
How to sell a delisted stock on Robinhood? ›
You can't trade delisted stocks with Robinhood.
How many companies get delisted per year? ›
The NSE delisted 100-odd companies in the past one year
Around 1,000 companies were compulsorily delisted in the past two years on the BSE and the National Stock Exchange (NSE).
How to get rid of a stock that no longer trades? ›
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.
