Understanding Share Delisting: An Overview

The term Share Delisting refers to the removal of shares from an exchange permanently. Once the stock has been delisted, the will be a privately held company or will presumably only trade on an OTC market (over-the-counter) depending on whether the delisting is voluntary or involuntary and what types of regulations apply.

Delisting of shares may be voluntary or involuntary depending on the circumstances of the company and what is required by law and regulations.

Share Delisting Types

1.Voluntary Delisting

When a company (or its representative) chooses to voluntarily remove shares from the exchange. For example, common reasons why companies may voluntarily delist their shares from publicly traded exchanges are:

•  Company merger or restructuring.
•  Low trading volumes.
•  Seeking to become a private company.
•  Reducing operating costs associated with exchange compliance.

Through a reverse book-building process, companies will typically offer shareholders an exit price upon delisting of the company’s shares.

2.Involuntary (Compulsory) means delisting

Delisting due to the company not complying with exchange requirements occurs. The Reasons for delisting can be as follows: 

• Non-compliance with listing requirements. 
• Financial Misstatements. 
• Not filing reports. 
• Extended trading supsension.

In this case, Investors will have a difficulty finding a buyer for their shares.

Reasons for Companies to Request Delisting

The Reasons Companies choose to delist are: 

1. Low Stock Price Performance. 
2. Decreased percentage of Public Owner. 
3. Business Opportunities. 
4. Financial Hardship. 
5. Regulatory Restrictions.

Understanding the Reasons for Delisting will allow a trader to better understand the Risks of Investing in a Company with a Delisted Stock, therefore avoiding possible losses.

To Protect Your Investments from the Impact of a Delisting

Delisting will impact Investors in many ways: 

1. Your Ability to Sell Your Shares. 
2. Less Opportunity to Exit Your Position. 
3. Possible Loss of Investment Capital. 
4. Difficult to Determine a Fair Value for Your Share.

Therefore, Investors must be Aware of the Impacts of Delisting and have Adequate Market Education.

How Traders Can Reduce Their Risks from Delisting

A Trader can Reduce Their Risks from Delisting By: 

1. Monitoring the Underlying Company’s Financial Information. 
2. Following Regulatory News by the company. 
3. Avoiding Illiquid stocks (those with less than average daily trading volume). 
4. Diversifying your investments in order to Reduce Risk. 

NXT Institutions, the leading trading institute in Malappuram, provides its students with the skills to recognize Delisting Warning Signs Early and to control their Risks Related To Delisting.

Importance of Market Education

Learning the impact of Delist is critical to a Trader’s long-term success. Through Structured Training, Traders become familiar with news and how to interpret it, manage Volatility and Avoid Losing Money. 

NXT Institutions, a top Forex Trading Institution in Malappuram, connects students with Stock Trading Companies in order to help them Increase Their Trading Skills and Profits.