Delisting

Definition:

Delisting is the process of removing a company’s securities from a stock exchange. This can occur due to a variety of factors, including:

• Loss of listing eligibility: The company may have violated the exchange’s listing requirements, such as having insufficient market capitalization or meeting certain financial criteria.
• Corporate actions: The company may undertake actions that result in its securities being delisted, such as merging with another company or being acquired.
• Market conditions: The exchange may decide to delisted a company due to declining market conditions or other factors.
• Voluntary delisting: The company may elect to delist itself in order to pursue other goals or to gain greater liquidity.

Process:

The delisting process typically involves the following steps:

1. Notice of intent: The exchange notifies the company of its intention to delist.
2. Public comment: The exchange may hold a public hearing or provide an opportunity for the company to submit objections.
3. Dellisting: If the company does not meet the exchange’s requirements or fails to object, the exchange will delist the company.
4. Trading halt: The exchange may halt trading in the company’s securities prior to the delisting.
5. Post-delisting activities: After the delisting, the company’s securities are no longer traded on the exchange. However, the company may still be required to file certain reports with the exchange.

Impact:

• Loss of liquidity: Delisting can lead to a loss of liquidity in the company’s securities.
• Higher costs: Companies that are delisted may incur higher costs, such as legal fees and filing fees.
• Loss of market visibility: Delisting can make it more difficult for investors to find information about the company.
• Impact on shareholders: Shareholders of a company that is delisted may lose their ability to sell their shares easily.

Examples:

• In 2023, XYZ Company was delisted from the New York Stock Exchange (NYSE) due to its declining market capitalization.
• ABC Company voluntarily delisted its securities in order to pursue a private equity deal.