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What happens if a stock is delisted?
Stocks are delisted from exchanges regularly. Discover the different types of delisting, why this happens and how delisted stocks affect investors and traders.
TraderSource: Bloomberg
Indices Shares Stock Listing Stock exchange Investor
Claire Williamson | Financial writer, Johannesburg
What’s on this page?
1. What does it mean that a stock is delisted?
2. Why does a company get delisted from the stock market?
3. What happens to shares when a company gets delisted?
4. Examples of delisted stocks
What does it mean that a stock is delisted?
A stock is delisted when it’s removed from a stock exchange. This can be voluntary, when the company chooses to do so for strategic or financial reasons, or involuntary, when the exchange forces the company to delist.
A delisting of shares can be contrasted with an initial public offering (IPO), which is the process of a private company going public. This is when a company will put its stocks up for sale to the public and its shares are traded on a stock exchange.
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Why does a company get delisted from the stock market?
There are two ways in which a company can be delisted from a stock exchange – voluntary and forced.
Voluntary delisting
Voluntary delistings occur when public companies choose to delist from an exchange, usually resulting in that company trading privately again. However, sometimes companies delist simply to move to another exchange.
Companies may want to delist for a number of other reasons:
Reduce costs. It’s expensive to trade publicly. The costs to ensure compliance with regulators and laws can be enormous, so smaller companies might find it’s not worth it to trade publicly
Make short-term profits. If a stock trades below its intrinsic value, the company may repurchase its own shares to profit over the short-term before delisting. This can also produce rewards for current shareholders, giving them considerable returns
Undergo a buyout. When a company is acquired, the new controlling shareholders may want to make the company private
Reduce decision-making time. Making decisions in a publicly traded company can take a lot of time, as the shareholders and the board of directors may both be able to vote. By removing the approval from shareholders for decision-making, companies can pivot faster
There are, however, disadvantages to voluntary delisting. If a company nee
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