delisting stock 101# Stock
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Voluntary Delisting
A company may voluntarily delist its shares from an exchange if the
cost of continuing listing outweighs the benefits. This usually happens when
there is little investor interest in a stock: it does not trade much, and
it is hard for a company to sell more shares to investors. This type of
stock is usually concentrated in the hands of insiders -- owners and top
managers -- and the delisting affects few retail or institutional investors.
In any event, when a company announces a voluntary delisting, there is
ample time for all who want to sell the stock to do so, usually to the
remaining insiders.
Partial Delisting
Some large international companies list their stocks on multiple
exchanges to have access to investors and capital globally. At some point a
company may realize that its stock trades mostly on one exchange. It may
decide to delist from a particular exchange while maintaining the listing
elsewhere. For example, a large European company may opt to delist from the
New York Stock Exchange while maintaining the listing on European exchanges.
If a stock is voluntarily delisted from a stock exchange, investors
still have multiple options to trade it. Institutions may continue to trade
the stock on a foreign exchange. A U.S. investment bank may maintain an
informal market in a foreign stock delisted from a U.S. stock exchange. In
this case the stock symbol is changed to indicate a foreign security; the
volume of trading usually drops but U.S. investors can still buy and sell it
in reasonable quantities.
Exchange Delisting
An exchange typically initiates a delisting for non-compliance with
continuing listing requirements such as minimum share price, volume of
trading, market capitalization or audited financial reporting. A company in
violation of these conditions is often in serious financial trouble,
possibly headed into bankruptcy, and its stock price has fallen dramatically
. The company is given time to bring its stock back into compliance; if it
fails, the stock is delisted. Sometimes a stock can lose a national listing
but still trade at a lower level such as on a Bulletin Board or Pink Sheets,
which have limited listing requirements. Many companies whose stock is
delisted end up in bankruptcy, with the shareholders completely wiped out.
If a shareholder ignores multiple warnings and fails to sell before a
delisting, he will likely lose his entire investment in the stock.
A company may voluntarily delist its shares from an exchange if the
cost of continuing listing outweighs the benefits. This usually happens when
there is little investor interest in a stock: it does not trade much, and
it is hard for a company to sell more shares to investors. This type of
stock is usually concentrated in the hands of insiders -- owners and top
managers -- and the delisting affects few retail or institutional investors.
In any event, when a company announces a voluntary delisting, there is
ample time for all who want to sell the stock to do so, usually to the
remaining insiders.
Partial Delisting
Some large international companies list their stocks on multiple
exchanges to have access to investors and capital globally. At some point a
company may realize that its stock trades mostly on one exchange. It may
decide to delist from a particular exchange while maintaining the listing
elsewhere. For example, a large European company may opt to delist from the
New York Stock Exchange while maintaining the listing on European exchanges.
If a stock is voluntarily delisted from a stock exchange, investors
still have multiple options to trade it. Institutions may continue to trade
the stock on a foreign exchange. A U.S. investment bank may maintain an
informal market in a foreign stock delisted from a U.S. stock exchange. In
this case the stock symbol is changed to indicate a foreign security; the
volume of trading usually drops but U.S. investors can still buy and sell it
in reasonable quantities.
Exchange Delisting
An exchange typically initiates a delisting for non-compliance with
continuing listing requirements such as minimum share price, volume of
trading, market capitalization or audited financial reporting. A company in
violation of these conditions is often in serious financial trouble,
possibly headed into bankruptcy, and its stock price has fallen dramatically
. The company is given time to bring its stock back into compliance; if it
fails, the stock is delisted. Sometimes a stock can lose a national listing
but still trade at a lower level such as on a Bulletin Board or Pink Sheets,
which have limited listing requirements. Many companies whose stock is
delisted end up in bankruptcy, with the shareholders completely wiped out.
If a shareholder ignores multiple warnings and fails to sell before a
delisting, he will likely lose his entire investment in the stock.