What Happens When a Company Gets Delisted?
When listed on a major exchange, such as the NYSE or Nasdaq, the companies and their stock have to meet several listing requirements on stock price, trading volume, capitalization, disclosure of material information or financial reporting.
Failure to meet any of the requirements may cause the company's stock to be delisted from the exchange, i.e. stop trading on the exchange. Delisting may be connected with company bankruptcy or dissolution.
In the delisting process the company gets a notification of its failure to comply with the requirements and is given a time period to fix the problem. Some companies are able to take effective steps to restore the compliance and some are not and they finally get delisted.
Ownership and Value Issues after Delisting
If a company is delisted, the shareholder still owns the same percentage of the company as before. Delisted stocks still entitle the shareholder to all the related rights, including owner transferability. Though in reality, delisting is seen as a huge negative. It frequently results in a massive loss in price, loss of interest of investors and practical impossibility to trade the shares. Since the company and the exchange disclose information about listing non-compliance and exchange warnings, investors get plenty of warning signs before the actual delisting. This causes the shares to drop long before the potential delisting as many investors sell right after the exchange makes a delisting announcement.
What If I Still Own Delisted Stock?
If you happen to own delisted stock, it can still trade on the Over-the-Counter Bulletin Board (OTCBB) or on the Pink Sheets where the regulations are lot less strict than on major exchanges. They, however, provide no easy access to the buyers, which can make your stock practically impossible to sell.
In some cases companies decide to delist voluntarily in order to go private from a publically traded company. In this case a company is essentially buying out existing stockholders. The stockholders are offered cash for selling their shares before the delisting date. If they refuse the offer or intend to keep their holdings for other purposes, they will become shareholders in in what will be a privately owned company, while the shares will become worthless.