When shares of a company are delisted from an exchange, the current shareholders continue to hold the stock but can no longer trade it. Delisting can be initiated by the company or by the exchange. How shareholders are affected depends on the type of delisting, its timing and circumstances.
A company may voluntarily delist its shares from an exchange if the cost of continuing listing outweighs the benefits. This usually happens when there is little investor interest in a stock: it does not trade much, and it is hard for a company to sell more shares to investors. This type of stock is usually concentrated in the hands of insiders -- owners and top managers -- and the delisting affects few retail or institutional investors. In any event, when a company announces a voluntary delisting, there is ample time for all who want to sell the stock to do so, usually to the remaining insiders.
Some large international companies list their stocks on multiple exchanges to have access to investors and capital globally. At some point a company may realise that its stock trades mostly on one exchange. It may decide to delist from a particular exchange while maintaining the listing elsewhere. For example, a large European company may opt to delist from the New York Stock Exchange while maintaining the listing on European exchanges.
Stock Trading Venues
If a stock is voluntarily delisted from a stock exchange, investors still have multiple options to trade it. Institutions may continue to trade the stock on a foreign exchange. A U.K. investment bank may maintain an informal market in a foreign stock delisted from a U.K. stock exchange. In this case the stock symbol is changed to indicate a foreign security; the volume of trading usually drops but U.K. investors can still buy and sell it in reasonable quantities.
An exchange typically initiates a delisting for non-compliance with continuing listing requirements such as minimum share price, volume of trading, market capitalisation or audited financial reporting. A company in violation of these conditions is often in serious financial trouble, possibly headed into bankruptcy, and its stock price has fallen dramatically. The company is given time to bring its stock back into compliance; if it fails, the stock is delisted. Sometimes a stock can lose a national listing but still trade at a lower level such as on a Notice Board or Pink Sheets, which have limited listing requirements. Many companies whose stock is delisted end up in bankruptcy, with the shareholders completely wiped out. If a shareholder ignores multiple warnings and fails to sell before a delisting, he/she will likely lose his/her entire investment in the stock.