Delisting of Shares from The Stock Exchange
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Delisting of shares from the stock exchange, what does this mean, and how it can impact you if you’re a shareholder of a company that decides to delist its shares?
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Meaning of Delisting of Shares
Delisting means the permanent removal of a company’s shares from the stock exchanges that also means that the shares of that company can no longer be traded on the stock exchange.
So, if you are a shareholder of a company that is set to be delisted then after the delisting of shares you cannot buy or sell the shares of that company on the stock exchange.
Though you can continue to hold the shares of the company after delisting. But, it would be very difficult for you to sell the shares off-market and get a good deal. So, liquidity can be a major concern for you.
Categories of Delisting
Delisting is mainly of two categories:
- Voluntary Delisting
- Involuntary Delisting
Voluntary Delisting
Voluntary means at one’s own free will, so the delisting of shares that happens because of the decision of the company itself is known as Voluntary Delisting.
This happens in cases where the company sees no benefits of keeping its shares float on the stock exchanges and where Promoter wants to increase its control.
The buyback of shares happens at the price decided by the company which generally is at the premium price than the prevailing market price of the stock.
Recently, Vedanta Limited announced its voluntary delisting of shares from the stock exchange.
Involuntary Delisting
Involuntary Delisting happens without their own will means when the company fails to adhere to the regulatory requirements or goes bankrupt then it is forced to delist from the stock exchange.
This forceful delisting is known as Involuntary delisting. This could happen because of the following common reasons:
- Violations of Regulatory Norms
- Fails to maintain its financial requirements or goes bankrupt.
- Ceases its Operation
- Not able to meet the minimum requirements to be listed on the stock exchange
I hope this would clear the concept of delisting to you.
Hi, I’m Managing Director at Gurpreet Saluja Financial Services where I help my investors to invest in mutual funds and achieve their financial goals. I’m also a Value Investor and here I write about Personal Finance & Investing.
