The stocks people buy and hold in their brokerage accounts are generally stocks that are listed on a public exchange, like the New York Stock Exchange or Nasdaq. There are rules that companies have to follow to trade on public exchanges, and there are financial requirements that need to be met. When this doesn't happen, it's possible for a stock to become delisted. This means it's removed from a public exchange.
This doesn't automatically mean that the stock in question is worth nothing, and that you can't still trade it. But delisted stocks tend to see their value drop, and in many cases, quickly. And trading them can become complicated. So if you own shares of a company you think might get delisted, you may want to sell them before that happens.
Why do companies get delisted?
Stock exchanges set rules that listed companies must follow. Failure to follow those rules could lead to a stock getting delisted. For example, failing to file certain financial reports could be grounds for getting delisted.
There are also financial requirements that companies need to adhere to. For a stock to stay listed on the Nasdaq, for example, it must have a $1 minimum share price. It also has to adhere to one or more of the following:
- Have a market capitalization of at least $50 million (which is measured by stock price multiplied by shares outstanding)
- Have total assets and revenue of at least $50 million
- Have shareholders' equity total at least $10 million
Keep in mind that some companies can actively seek to be delisted. This could happen if they decide they want to become privately held.
What to do if a stock of yours gets delisted
When a stock gets delisted, its value isn't automatically wiped out. But often, stocks get delisted when companies find themselves in bankruptcy or on the verge of it. And that has the potential to render your stock worthless, or worth very little.
Also, once a stock is delisted, it's possible to buy and sell shares in what's known as the over-the-counter market. This means those shares trade through private brokers.
It's generally best to try to sell your shares before a company gets delisted. So if you own shares of a given company and there are rumors of a near-term bankruptcy filing, that should signal to you that a delisting of that stock may be in the cards. And in that case, it may be a good idea to sell your shares before that happens.
As an example, you might remember Sears, the once-beloved department store that ran into tough financial times. Sears was delisted in late October 2018. Its final share price before its Nasdaq delisting was $0.36 a share. Just a week or so prior, Sears had filed for bankruptcy.
Can a delisted stock get relisted?
It's certainly possible. But it also doesn't tend to happen all that often. For a company to get relisted, it would need to solve the issues that led it to get delisted. But since those issues are often financial in nature, that's not always possible.
For example, many companies file for bankruptcy and close up operations. So in that case, a relisting is unlikely.
It's not always possible to predict when a company will get delisted. But if you keep tabs on your investments, it's a situation you might be able to get ahead of.
Of course, if you're worried about the idea of having stocks you own delisted, you could opt to load your portfolio with broad market ETFs instead. Although it's possible for ETFs to get delisted, too, if you own shares of something like an S&P 500 ETF, that may be less likely to happen, since in this case, you're tracking a giant index instead of investing in a single company.
FAQs
Delisting can negatively impact shareholders in several ways. Institutional investors may be forced to sell their holdings as they often can't own stocks not listed on a major exchange. For all shareholders, delisting often leads to decreased liquidity, lower stock prices, and difficulty selling shares.
Do I lose my money if a stock is delisted? ›
Though delisting does not affect your ownership, shares may not hold any value post-delisting. Thus, if any of the stocks that you own get delisted, it is better to sell your shares. You can either exit the market or sell it to the company when it announces buyback.
What happens to puts if a stock is delisted? ›
When a stock is delisted, options trading on that stock typically ceases. This means that options holders are no longer able to buy or sell their options on the open market. However, they still have the right to exercise their options if they choose to do so.
How long can a stock stay under $1 before delisting? ›
If a company can't maintain the minimum requirements to remain listed, Nasdaq will delist it. Failure of a company to meet a minimum closing bid price of at least $1 for 30 consecutive trading days can trigger delisting.
How to get money from delisted shares? ›
The corporation must honour the delisting price. If the firm has been delisted for more than a year, the shareholder might approach the company and negotiate a private sale of the shares to the promoters. This will be an off-market transaction, with the price agreed upon by the seller and buyer.
Can a stock come back after delisting? ›
A delisted stock can theoretically be relisted on a major exchange, but it's rare.
Can I claim a loss on the stock that are delisted? ›
Technically the IRS requires that a stock be totally worthless before you are entitled to a deduction. Some delisted stocks still trade in other markets which means they're not totally worthless as the iRs requires.
How to get rid of a stock that no longer trades? ›
If the security cannot be sold in the market, it may be possible to dispose of the worthless security by gifting it to another person who can be related or unrelated to you. If you gift the worthless security to a family member, you will need to ensure that the person is not your spouse or minor child.
What are the benefits of delisting? ›
By removing shares from the public market, the company reduces its exposure to such risks and can retain greater control over its ownership structure. Another significant advantage of delisting is the protection it affords from market volatility.
What happens if you short a stock that gets delisted? ›
What happens when an investor maintains a short position in a company that gets delisted and declares bankruptcy? The answer is simple: The investor never has to pay back anyone because the shares are worthless. Companies sometimes declare bankruptcy with little warning.
The Securities and Exchange Commisssion (SEC) is authorized under federal law to suspend trading in any stock for a period of up to 10 business days when it believes that the investing public may be at risk.
What happens if a stock goes to zero? ›
When a stock's value falls to zero, or near zero, it typically signals that the company is bankrupt. The stocks are frozen and unless the company restructures, it's likely you will lose your investment.
How long do delisting appeals take? ›
EXCESSIVE REVERSE STOCK SPLITS
A company would still be permitted to appeal the delisting determination to the Nasdaq hearings panel, where it could potentially receive up to 180 days to regain compliance.
What happens if you don't sell a delisted stock? ›
Investors holding shares after a delisting will only be able to sell them OTC. That generally means less liquidity, finding it harder to locate buyers at the price you want, and potentially being left in the dark about what the company is up to.
What happens to your money if delisted? ›
The Impact of Delisting on Investors
Once a stock is delisted, stockholders still own the stock. However, a delisted stock often experiences significant or total devaluation. Therefore, even though a stockholder may still technically own the stock, they will likely experience a significant reduction in ownership.
Do I lose my shares if a company delists? ›
When a company delists, investors still own their shares. However, they'll no longer be able to sell them on the exchange. Instead, they'll have to do so over the ounter (OTC).
What happens when a stock is untradeable? ›
You might be unable to search or find a stock or ETF because it's not available to trade. Securities can be untradeable for a few reasons, including: The exchange has paused trading for it. It's been delisted from the major exchanges and trades in the over-the-counter (OTC) market.
What happens if you short a stock and it gets delisted? ›
What happens when an investor maintains a short position in a company that gets delisted and declares bankruptcy? The answer is simple: The investor never has to pay back anyone because the shares are worthless. Companies sometimes declare bankruptcy with little warning. Other times, there is a slow fade to the end.
Can I sell my delisted stock on Robinhood? ›
A stock is delisted when it's been removed from the stock exchange. You can't trade delisted stocks with Robinhood. You can learn more about what to do if you own a delisted stock in Mergers, stock splits, and more. An exchange-traded fund (ETF) is a group of assets pulled together that trades like a normal stock.
