Investing in stocks can be a roller-coaster ride-hot one minute and something burning your finger weirdly the next. One of the most disturbing situations for any investor is a stock being delisted from an exchange. Once this happens, there is no end to the confusion, frustration, and future fears about What To Do Upon Delisting A Stock!
If you have just recently learned that one of the stocks you own will be delisted or has already been removed from the main exchange, rest assured there is nothing to panic about.
In this blog post, we will explain the meaning of delisting, its impact on your holdings, and What To Do Upon Delisting A Stock.
Here, they talk about the removal of shares from an exchange, such as the NYSE or the NASDAQ. A stock can be removed either voluntarily by a company or forced due to certain circumstances like financial instability, failure to meet listing requirements, or changes in company structure. When stocks are delisted, they do not trade on the major exchange, yet that does not mean they vanish.
So there are two kinds of delisting:
> Voluntary Delisting: The company may decide to delist itself from a given exchange, typically due to some merger or acquisition, or a decision to switch to another market.
> Involuntary Delisting: Instances where the exchange delists a stock, usually, when the company has failed to abide by certain set minimum requirements, such as least price or market capitalization.
There can be several reasons for stock delisting. Some of them are:
> Failure to Meet Exchange Requirements: Any particular exchange will have its own set of rules, such as a minimum stock price or market capitalization. If a company fails to satisfy such requirements, then it may get delisted.
> Financial Troubles: Firms that enter bankruptcy proceedings or show overt signs of severe financial distress may be removed from a given exchange.
> Mergers and Acquisitions: Should a company be acquiring another that is publicly listed, that stock will be delisted.
> Illiquidity: A company whose stock trades irregularly may be delisted due to low trading volume.
> Fraud and Scandals: If a corporation is known for misconduct, such as accounting fraud, its shares are likely to be delisted.
Although there are still some opportunities, your stock can no longer be traded on major exchanges after it is delisted.
> OTC Trading: If your stock is delisted from the major exchange, then it may be traded on over-the-counter (OTC) methods like the OTC Bulletin Board (OTCBB) or Pink Sheets. These markets are less regulated, thus bringing more risk due to lower liquidity.
> Being Illiquid: Sometimes, stocks that got delisted may have very low or no market for trading. If no one wants to buy, you may not be able to sell your stock at all.
> Share Value: It would be challenging to get your money back if a stock was delisted because of bad financial standing. The share's value would probably decline or maybe go to zero.
> Shareholders Might Be Provided A Buyout: Should the company undergo an acquisition or merger, shareholders can elect to be acquired at a predetermined price. Although it is not a guarantee, this could potentially be the best way for you to part with your stake in the company.
Now that you know what delisting is and how it affects your stock, what should you do if it occurs to you? You can take the following actions to manage your investment:
1. Remain Calm and Fetch Information
The first thing you need to do is to control the euphoria. It may seem like the end of the world for a stockholder, but a delisting does not necessarily mean your investment is lost. Start with research into the reason for the stock's delisting. Was it financial instability, a merger, or something else? Knowing the reason will influence what you decide to do next. Look for any company announcements or news relating to the stock.
2. Make Assessments Regarding the Company's Future
Once you know the reason for the delisting, you should assess whether there is still hope for the company to grow or recover. For instance, if it was delisted due to financial instability, are they working on recovery? Is it restructuring? Have they received new leadership? Sometimes, companies recover from delisting, but it takes time and effort.
3. Explore OTC Markets
If your stock is delisted, check if it’s still available on OTC markets. Trading on OTC markets may be your only option to sell the stock but keep in mind that liquidity could be much lower than on major exchanges. So, it would not be uncommon for a person not to find a buyer almost instantly, and if he does, the price could not benefit him.
4. Selling And Holding
After analyzing, you are left with selling or holding. If you think that it has not bottomed out and can still come back, you could hold on to it, a rather risky move. If you are not sure about this company's future or feel like the stock has lost too much value, it may be the best bet to avoid further losses by selling.
5. Buyout Offers
Check For Buyout Offers With any luck, the company is going to be acquired or merged with another company and may offer to buy back your shares. Find out if there are any buyout plans like that and whether you'll be better off by proceeding with the buyout.
6. Consulting A Financial Advisor
consulting a financial advisor on how to go about it, especially when you have a significant stake in the delisted stock, might be a good idea. They will put you in the right place and have a clear understanding of how to approach investing.
A delisted stock does not automatically mark the end of one's investment; however, it brings along new challenges. The first thing to do would be to understand why the stock got delisted, find out if there is any future for that company, and decide whether it is time to close it or continue holding and then decide What To Do Upon Delisting A Stock. Some companies do come back after being delisted, whereas sometimes it is time to cut one's losses. Always keeping yourself updated, staying patient, and seeking professional advice when necessary will help ensure smooth sailing. One can sail through delisted stocks and make the best decision for one's portfolio with careful thought and strategy.
> Here’s the link to the YouTube Channel below created by Ruchir Gupta, India’s Leading Stock Market Mentor and currently the Most Trending Role Model in the Stock Market Industry where he illustrates every topic related to The Stock Market deeply by stating different relatable causes and effects and also coming up with appropriate solutions to the Problems!
Go and watch to avoid problems and learn about the stock market with exact logic and strategies!
Don’t forget to Subscribe to RUCHIR GUPTA & RUCHIR GUPTA PODCAST on YOUTUBE
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