Delisting

Delisting is defined as the removal of a listed security of a company from a stock exchange, having been previously traded on a permanent basis.

Delisting can occur for a number of reasons, though effectively prohibits the trading of a specific company on a stock exchange.

This can be performed either on a voluntary basis or decision by a company or forcibly.

Common reasons for compulsory delisting include some form of wrongdoing by a company or failure to properly adhere to the standards or regulation of a respective stock exchange.

What Are Companies Delisted?

All traded securities must adhere to specific norms or rules when trading on a stock exchange. Failure to do so is the most common reason for delisting.

Ultimately, each stock exchange has a specific list of rules and regulations mandating trading on its platform.

In addition to not adequately meeting listing requirements, companies can also be delisted from stock exchanges for other reasons.

This includes companies declaring bankruptcy or mergers, or even looking to become private entities and no longer operate as publicly traded.

Share prices are also common reasons for delisting, especially in the event of decreases below $1 for a prolonged period of time. In such instances, companies may be at risk of delisting.

In every situation, the decision to delist a company is not an abrupt process but one that involves a company to avoid such a fate.

An exchange routinely provides a letter of non-compliance to a company, which can take necessary steps to retain its status as a tradable entity on a stock exchange.