What does delisted stock meaning? The New York Stock Exchange (NYSE) and the Nasdaq are both stock exchanges and stock market indexes, and most investors’ equities are listed on one or the other. Listed companies must adhere to a set of regulations established by the exchange to maintain their listing. They are delisted and removed from the trading platform if they don’t. Generally, when investors speak about stock delisting, they’re talking about a forced delisting launched by exchange rather than a voluntary delisting.

If a stock is taken off the market, this is what occurs. An exchange sends a notice to a corporation for being in violation. A date is attached to that warning, and if the corporation does not fix it within that time frame, it is pulled from the market and traded over the counter (OTC). The fundamentals of the company and the stock trading techniques stay the same.

Delisted stock  has a stigma and is often a warning that a firm is insolvent, approaching bankruptcy, or can’t fulfill the exchange’s minimal financial standards for other reasons. Still, you don’t inevitably lose money as an investor. Institutional investors often pull their money out of a company once it is delisted.

Delisted Stock

So what is delisting of shares? Delisting occurs when a firm withdraws its stock from the stock market and no longer has shares available for trade. It becomes a private corporation whenever the firm removes the share from trade.

It is not considered delisting if a company’s shares are listed on many stock exchange platforms. Just one of the stock exchanges removes them. Delisting refers to removing one’s stock from all exchanges where it is no longer available for trade.

Types Of Delisting Of Shares

There are two broad kinds of factors that might be used to explain why a firm is being delisted.

Voluntary Delisting

When a business withdraws its securities from a stock exchange, it is known as a “voluntary delisting.” All stockholders’ shares are paid back and removed from the exchange. Expansion or reorganization plans are common causes of a company’s decision to delist itself voluntarily.

Also Read: What are Stock Quotes?

Occasionally, an investor who wants a controlling stake may take over a corporation. This share may exceed the limit set by the government. A minimum of 25% of a company’s stock must be made accessible to the general public in India. Acquisitions of more than 75% of the company’s stock may lead to the company’s delisting if the buyer expects it to become private. Sometimes, the firm may be delisted to give the promoters a more significant stake in the company.

Involuntary Delisting

An involuntary delisting occurs when the firm is ordered by the regulatory authorities to cease trading its shares. The regulators use this as a tool to impose fines on the corporation. In this instance, investors cannot vote in favor of the delisting. The following are the justifications for delisting a company:

Failure to adhere to the terms of the exchange agreement. Over the last three years, the company’s shares have been halted from trading for more than six months or traded seldom. Bankruptcies, in which a business has been losing money for the last three years and has a negative net value.

An impartial appraiser must evaluate the fair market value of each share purchased by the Promoters from public shareholders.

What Happens To The Shareholders And Company After Delisting

After a stock is delisted, shareholders may no longer sell or purchase their shares, but their ownership rights remain intact. A stock delisting may positively or negatively impact the share price.

Let’s take a closer look at what happens when a stock is delisted. What happens to investors and traders when a stock is taken off the market? Investors retain ownership of their shares when a corporation is delisted. In any case, the exchange will no longer accept them for sale. So they’ll be doing it over the counter instead (OTC).

Involuntary delisting is sometimes a warning that a firm is on the verge of bankruptcy, even though the value of its stock doesn’t immediately increase or decline with the delisting. Investors run the risk of losing their money in this scenario.

A firm may provide shareholders extra perks such as warrants, bonds, and preferred shares when they delist voluntarily to trade privately.

If a stock gets delisted for whatever reason, traders might benefit. Depending on the grounds for privatization, the share price of a firm that chooses to delist may rise. As long as the trader thinks the share price will rise, they may establish a “long” position.

A company’s delisting is sometimes a sign of impending insolvency or a loss of trust among investors. Market participants who believe that the share price will decline may take positions to “sell” the stock.

Can A Delisted Stock Come Back?

Sure. Only if the Securities and Exchange Board of India (SEBI) allows it may a stock delisting

 be relisted. To relist these shares, the market regulator has various requirements. Voluntary delisting: Stocks voluntarily removed from the market will not be relisted for five years.

Conclusion

Shareholders’ rights at Nuuu and claims against a delisted firm are unaffected by a delisting of stocks. Although thousands of securities are traded over-the-counter, this might lower the share price and make it more challenging to get rid of a company’s stock. Open Demat Account and Start Investing with Nuuu.