Entering text into the input field will update the search result below

What Happens When A Stock Is Delisted?

Updated: Mar. 31, 2023Written By: Kimberlee LeonardReviewed By:

When a stock is removed from a stock exchange, it is considered delisted. This can be a voluntary action initiated by the company or an involuntarily action initiated by the exchange.

Man working in home office
MoMo Productions/DigitalVision via Getty Images

What Does It Mean When a Stock is Delisted?

To be delisted means to be removed from an exchange, meaning the stock is no longer traded on that specific stock exchange. A company can elect to delist its stock, pursuing a strategic goal, but more commonly companies are forced off a stock exchange because the stock no longer satisfies certain minimum requirements. A stock dropping below $1 per share for an extended period of time can be one reason for delisting.

Note: Delistings can represent either positive or negative developments for stocks. Investors should be aware of the company's financial situation in order to determine what course of action to take following a delisting.

What Happens When a Stock is Delisted?

When a company initially applies to an exchange, it has to meet certain listing requirements. It must further maintain compliance with these requirements to remain on the exchange. If a company fails to meet these requirements, it may be put on probation. Companies that are on probation can trade on the exchange for a limited period of time while they attempt to remedy any issues. In some cases they are identified with a “BC” after the stock symbol to indicate that they are currently out of compliance with exchange requirements.

Companies that are out of compliance are notified by the exchange and usually have 10 days to respond or the exchange will proceed with delisting. That would represent an involuntary delisting. Stocks may trade Over-the-Counter (OTC) following a delisting.

Types of Delistings

There are two types of delistings:

1. Voluntary Delisting

In a voluntary delisting, the company is choosing to remove itself from the exchange. Often the company will continue to trade but does so in over-the-counter markets. There are a number of reasons that a company may choose to delist:

  • Cost reduction: There are material costs associated with complying with rules and regulation. A voluntary delisting may occur when a company determines that there is no longer a financial benefit to being publicly traded.
  • A buyout: In a buyout, the purchasing entity often takes the purchased company private. Purchasing entities can include private equity firms or larger acquiring companies that will be purchasing most or all of the purchased company's stock.
  • Faster decision-making: By delisting and going private, companies can reduce shareholder and board input. This can make them more nimble in making big decisions.

2. Involuntary Delisting

This is also called a forced delisting. It occurs when the stock exchange forces the company off of the exchange because it no longer meets the minimum regulatory requirements of the exchange. Violations could be related to not maintaining a minimum stock price, minimum market capitalization, or failing required document filings.

What Happens to Shares When a Stock is Delisted?

If a stock is delisted, shares may continue to trade over-the-counter on the OTC bulletin board (or possibly on an overseas market). Shareholders can still trade the stock, though it is likely that the market will be less liquid.

Shareholders should carefully evaluate delisted stocks, as moving off an exchange may mean that the company is in financial trouble and may be facing bankruptcy soon.

If the stock ceases to be publicly traded, shareholders may be either bought out or have their shares restructured to participate in the private equity holding of the company. Sometimes, shareholders are offered warrants, bonds, and preferred shares when a company moves from the public to private status.

Can a Stock be Relisted?

It is possible, albeit rare, for a delisted stock to become relisted later on a major exchange. In order to do so, the company would have to rectify any and all reasons that it was delisted in the first place. This would mean it would have to solve financial issues and avoid bankruptcy as well as file all necessary documents to become compliant again.

Historical Examples of a Delisted Stock

Burger King is an example of a company that was delisted, relisted, and delisted again. The fast-food chain voluntarily delisted in 2010 from the New York Stock Exchange. This delisting was prompted by a private buyout by 3G Capital. The private entity was relisted two years later and traded for some time until it merged with the coffee house chain, Tim Hortons. The merger created a new company, Restaurant Brands International (QSR) that now trades on the Toronto Stock Exchange.

A more recent example of a delisted stock is Twitter. Twitter stock was delisted from the New York Stock Exchange on November 8, 2022 after the company went from being a public to a privately owned company.

Bottom Line

A stock can be removed from the exchange and delisted either voluntarily or involuntarily. When this happens, the stock either moves to private status and is restructured or it trades over-the-counter.

This article was written by

Kimberlee Leonard profile picture
Kimberlee brings professional experience to her writing. She started as a FINRA Series 7 broker and later transitioned her career into owning an insurance agency and preparing taxes.

Analyst’s Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

Recommended For You

Comments (1)

ADR shares for GSH terminated and ADR shares sold in April 2022 and disbursed. What are tax implications? Should ADR issuer send any tax documents like a 1099?
Disagree with this article? Submit your own. To report a factual error in this article, . Your feedback matters to us!
To ensure this doesn’t happen in the future, please enable Javascript and cookies in your browser.
Is this happening to you frequently? Please report it on our feedback forum.
If you have an ad-blocker enabled you may be blocked from proceeding. Please disable your ad-blocker and refresh.