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Delisting

Candlefocus Editor
Delisting is an action where a stock is removed from a stock exchange. This removal is usually due to the stock not meeting the required criteria set by the exchange from which it is being delisted. To remain listed on the exchange, stocks must usually meet certain criteria such as maintaining a certain share price, reporting financials in accordance with listing rules, and other qualifications. When a stock does not meet the necessary criteria, the exchange may take action to remove the stock from listing. This is what delisting is.

When a stock is delisted from an exchange, it generally results in a decrease in liquidity. The stock can no longer be traded through the exchange and it is much harder to find potential buyers and sellers for the stock. It may also result in a decrease in visibility of the stock as it is no longer actively traded. This decrease in visibility may further reduce liquidity and make it more difficult to determine the true value of the stock.

In most cases, a stock will be delisted due to sustained low share prices. In particular, major indexes prefer not to have stocks with share prices below $1 staying on the exchange. In such cases, the exchange may take action to delist the stock. Other reasons for delisting may include not meeting reporting requirements, failure to pay sources, bad debt and non-compliance with listing rules.

The consequences of delisting can be significant for businesses. Having a stock delisted can mean a decrease in liquidity, a decrease in value and a consequent erosion in investor confidence. Therefore, businesses strive hard to avoid being delisted from an exchange.

Delisting is an action which usually spells doom for a stock. The stock no longer meets the requirements of the exchange, liquidity of the stock decreases, its value decreases and visibility is reduced. Companies must take all measures to ensure their stock does not get removed from an exchange to avoid the consequences.

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