What happens if you suddenly get a notice that your stock is about to be delisted? Well, the delisting process is when your stock is taken off an exchange and it means that you will no longer be able to sell it to the market. Don’t worry, you still own the stock and there are options you can take to sell it.
If your stock gets delisted then you will have 3 options to sell it. First, in some rare circumstances, a broker would be willing to buy the delisted stock from you. Second, most companies that get delisted will offer to buy back the shares from investors outside the market. Third, if all else fails you can sell your shares on the over-the-counter market if you can organize a buyer.
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Let’s jump right into everything you will ever need to know about delisted stocks and your options to sell them.
Why You Still Own a Stock After a Company Has Been Delisted
Once a company has been notified of the exchange’s decision to delist them then you will get a notice. This notice will let you know why your stock is going to be taken off the exchanges. Don’t worry however as you still own your stock and can sell it.
The reason why you still own your stock is that when you bought it became your asset. Without cause, a person can’t go into your portfolio and take your stocks away from you. You will continue to hold the stock in your account even after the stock as been delisted.
However, there are a couple of things that you should be aware of. First, when your stock gets delisted the trading volume will dry up. This means that you will be unable to easily sell or liquidate your position. Because of this, most investors should think about liquidating their position once they hear that their stock will be taken off the exchange.
The second thing that you should know is that if a company gets delisted the chances of them getting listed again are very slim. This is because normally when a stock gets taken off the exchange then it is because either there was not enough volume to justify it being openly traded or the company failed to submit the necessary reports to maintain its listing.
Because of this companies typically do not come back from being delisted. Typically a company that is experiencing financial hardships and can’t submit the necessary paperwork will be unable to get back on an exchange. Just resubmitting the listing form for the committee to review it costs around $10,000!
However, do not worry. Even if your company gets delisted you will still own the stock.
How Can I Sell A Delisted Stock?
So your stock is delisted…do not worry it is not the end of the world. Here are the 3 ways that you can turn around and sell your stock.
When it comes down to selling a delisted stock there are only 3 ways that you can sell your stock.
- Sometimes a broker will buy it from you
- You can sell your shares back to the company
- You can sell your shares to another investor with an over-the-counter transaction
While it is harder to sell your stock after your company becomes delisted it can be done with a little effort. The time it is going to take to sell your delisted stock is going to be between 1-3 weeks if you are a retail trader and actively looking for a way to sell it.
The reason it takes so long to sell a delisted stock is that you essentially have to make your own exchange. You need to fund a buyer in order to sell the stock. Sometimes this is easier and other times it is nearly impossible. However, with a bit of tenacity, you can usually sell any delisted stock.
Sometimes You Can Get Your Broker to Buy a Delisted Stock
On occasion, a dealer will offer to buy your position. This is rare but it has happened when the dealer needs to cover their books.
The reason why brokers would be interested in buying a delisted stock from you is that sometimes they need to settle customers’ margin accounts or settle their own books due to how shorting works.
If you call up your broker you can see if they would be interested in buying your position from you. However, this is an extremely rare occurrence and chances are you will not be able to sell your stock to the broker. However, it does not hurt to email or call them and see if they will.
When a dealer gives out shares to short they have to handle the ‘borrowing’ part of the transaction. If too many people begin to default on their margin accounts while in short positions then the dealer might need to inject liquidity into the market and secure some shares to settle the entire transaction.
As such, you can look into this option if you need to liquidate a position on a company that has been delisted. If you are lucky then your broker will have a program in place to buy these shares.
You Can Sell Your Shares Back to the Company
One of the most popular ways that people manage to sell their shares of a delisted company is by selling them back directly to the company.
When your stock gets delisted from the exchange that means that you still own a small portion of the company. While not many people would be interested in buying these shares from you the company would be. This is why companies will issue stock re-buy programs if they want to get a portion of their stock back.
If you find yourself owning delisted stock then reach out to the company itself. Often companies will put in place a program to buy back delisted stock for a decent price. These stock buyback programs serve two purposes.
First, a delisted stock buyback program demonstrates the company has faith in its future. If you find a delisted company buying back shares from its investors that is a good sign that the company has a good plan to return back to profitability.
Second, a delisted company buying back its stock demonstrates a consolidation of its stock. Often companies who want to return back to the exchange will try to buy up their shares for cheap from personal investors so that they can return to the exchange and resell them for a higher price.
Generally speaking, if a company has a program in place to buy back their shares after being delisted then that is a good sign. If you want to sell your delisted shares the best buyer is the company itself.
If you want to sell your delisted shares then reach out to the company and ask if they would like to buy them.
You Can Sell Your Shares to Another Investor
Finally, if the broker or the company does not want to buy the shares the last way you can sell them is to sell them directly to another investor.
In order to do this you will have to register an account with a broker that offers market-making services in the over-the-counter market (OTC). This market is a digital market that serves as a general marketplace of stock. Ask your current broker if they can set up a market to sell your delisted stock.
Most brokers would be fine with this as they will make a commission for the sale. However, it will be on you to find the other person to buy the stock. Just putting your delisted stock out on the market often will not get a buyer interested. Here you are going to go out of your way to find another person who wants to buy your stock.
The best places to find other investors who want to buy your delisted stock are either online or at investor meetups in your local area. Often at CFA forums, you can find a wealth manager who might be interested in buying your delisted shares from you so long as the company is still profitable.
Once you find a buyer then you need to schedule a sale with the broker. Your broker will set up a market for your delisted stock and you will set the ask price. The buyer that you found will log in and then buy the shares for the ask price.
Common Questions About Delisted Stock
Besides how to sell delisted stock and whether or not you still own it there are several other common questions that I have provided answers to below.
Is a Delisted Stock Worthless?
In most cases, a delisted stock is worthless. This is because a company gets delisted when either nobody trades it anymore, its price is below $1.00, or the executive team fails to publish reports.
Either one of these 3 causes indicates that a company is no longer profitable. Because of this if a stock gets delisted or ‘grelisted’ then it likely is worthless.
What Are the Chances My Company Will Come Back to the Exchange?
I am not going to lie to you, the chances that your company comes back from being delisted are slim. This is because to get relisted on an exchange costs between $5,000-$30,000 just to start the case.
In total, a listing on a good exchange can in total cost hundreds of thousands of dollars. If your company is already failing then chances are it will not have the resources to get relisted on an exchange.
That being said every company is different and I have seen some get relisted on an exchange.
There you have it; just about everything you need to know about what happens to your stock and how to sell it during and after a delisting.
Don’t worry you can always sell the delisted stock if it has value. If you enjoyed this article then subscribe to the free newsletter and share it around the web. Here a ChronoHistoria I aim to demystify the stock investing and trading industry so that you can make a higher return!
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