Common causes
Delisting can occur when a company no longer meets formal listing requirements, such as market capitalization or shareholder count, or when it falls under substantive review criteria, such as being insolvent or having made false statements in its securities report. It can also be a deliberate outcome, chosen by a company through a tender offer (TOB) leading to a wholly owned subsidiary status, or a broader business combination.
What investors should keep in mind
Once delisted, a stock generally can no longer be traded on that exchange. In delistings tied to a tender offer, a buyout price is sometimes offered, but in delistings caused by deteriorating business conditions, the liquidity and value of the shares held may be significantly impaired. This is an important risk factor to be aware of.
This article is provided for general informational purposes only and does not recommend or solicit the purchase or sale of any specific investment method or security. Final investment decisions are your own responsibility.
Frequently Asked Questions
- What happens to my shares if a stock is delisted?
- Once a stock is delisted, it generally can no longer be traded on that exchange. In delistings related to a tender offer or a company becoming a wholly owned subsidiary, a buyout price is sometimes offered, but in delistings caused by deteriorating business conditions, the value of the shares may be significantly impaired.
- Under what circumstances does delisting occur?
- Delisting can occur when a company no longer meets an exchange's formal listing requirements, such as market capitalization or shareholder count, or substantive review criteria, such as being insolvent. It can also result from a company's own decision, such as a tender offer, becoming a wholly owned subsidiary, or a business combination.
