What is Delisting?
Delisting is the process of removing a stock from a stock exchange. This can occur for a variety of reasons, including when a company goes bankrupt, fails to meet listing requirements, or is acquired by another company. Delisting can also be voluntary, such as when a company decides to go private.
Why Companies Delist
There are many reasons why a company might choose to delist from a stock exchange. They may decide that they no longer need the public capital that comes with being listed on the exchange. Alternatively, they may be delisted due to lack of compliance with listing requirements, such as meeting certain financial reporting requirements. Delisting can also be involuntary, such as when a company goes bankrupt or is acquired by another company.
The Impact of Delisting
Delisting can have a significant impact on the value of a company’s shares. When a company is delisted, their shares become much less liquid, making it difficult to buy or sell them. In addition, the delisting can lead to a decrease in the company’s stock price as investors become less interested in investing in the company due to the lack of liquidity.
Examples of Delisting
One recent example of a delisting is that of German carmaker Volkswagen. In 2020, the company decided to delist from the Frankfurt Stock Exchange in order to simplify its capital structure and reduce costs. Another example is the delisting of American pharmaceutical company Mylan, which was delisted from the Nasdaq in 2019 after failing to meet the exchange’s financial reporting requirements.
Conclusion
Delisting is a process by which a company’s shares are removed from a stock exchange. This can occur for a variety of reasons, including when a company goes bankrupt, fails to meet listing requirements, or chooses to go private. Delisting can have a significant impact on the value of a company’s shares, as they become much less liquid and the stock price can decrease. Examples of recent delistings include Volkswagen and Mylan.
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