If a Stock Is Delisted, Can It Be Relisted?

A company’s stock being listed on a major exchange is fundamental to public financial markets, allowing investors to buy and sell shares with ease. This listing provides companies with access to capital and offers investors liquidity. However, a stock can be removed from an exchange, a process known as delisting. This removal can significantly impact both the company and its shareholders, altering how the stock is traded and its perceived value.

Understanding Stock Delisting

Stock delisting refers to the removal of a company’s shares from a stock exchange, meaning they can no longer be traded on that particular platform. This can occur either voluntarily, by the company’s own decision, or involuntarily, if the company fails to meet the exchange’s continued listing requirements. Voluntary delistings often happen when a company decides to go private, merges with another entity, or is acquired by a private equity firm. These strategic moves allow companies to reduce the costs and regulatory burdens associated with being publicly traded.

Involuntary delisting occurs when a company no longer complies with the listing standards set by exchanges like the New York Stock Exchange (NYSE) or Nasdaq. Common reasons include failing to maintain a minimum share price, insufficient trading volume, a low market capitalization, or a decline in shareholder equity. Companies may also face involuntary delisting for not adhering to Securities and Exchange Commission (SEC) reporting standards, failing to file timely financial reports, or experiencing corporate governance issues like a lack of independent directors. Exchanges typically issue a notice of non-compliance, providing the company a period, often 180 days, to rectify the issues before delisting procedures are finalized.

Trading Delisted Shares

Once a stock is delisted from a major exchange, it usually transitions to trading on over-the-counter (OTC) markets. These decentralized markets facilitate direct trades between buyers and sellers through a network of dealers. The OTC Markets Group categorizes companies into different tiers, including OTCQX, OTCQB, and OTC Pink, each with varying levels of financial disclosure and regulatory oversight. OTCQX has the most stringent standards, while OTC Pink, historically known as “Pink Sheets,” has minimal requirements and less transparency.

On OTC markets, liquidity is generally reduced, making it more challenging to buy or sell shares quickly without impacting the price. Bid-ask spreads, the difference between the highest price a buyer is willing to pay and the lowest price a seller is willing to accept, tend to be wider, which can result in less favorable execution prices for investors. Transparency is also lower, as many OTC-traded companies have less stringent reporting requirements than those on major exchanges. This environment can lead to increased price volatility and difficulties in obtaining current price information, impacting shareholders who may find it harder to liquidate their holdings or assess the true value of their investment.

Is Relisting Possible?

It is possible for a delisted stock to return to a major exchange, though it is a challenging and uncommon occurrence. Relisting signifies a company has addressed the issues that led to its delisting and regained the necessary qualifications for a public listing. This process indicates a significant turnaround or a resolution of previous non-compliance. The possibility of relisting offers a pathway for companies to regain access to broader capital markets and potentially restore investor confidence.

Meeting Relisting Requirements

To relist shares on a major exchange like the NYSE or Nasdaq, a company must satisfy stringent requirements, similar to those for an initial listing.

Financial Standards

Financial standards include maintaining a minimum share price, often $1.00, for a specified period, usually 30 consecutive business days. Companies must also meet minimum thresholds for market capitalization, shareholder equity, and sometimes profitability. For instance, the NYSE has various financial tests, including specific thresholds for stockholders’ equity and market value of publicly held shares.

Operational Standards

Operational standards require sustained business operations, an adequate public float (shares available for trading), and a sufficient number of shareholders. For example, the NYSE may require at least 400 shareholders holding 1.1 million or more publicly traded shares.

Corporate Governance and Reporting

Corporate governance requirements mandate compliance with rules regarding board independence and the establishment of an audit committee. Companies seeking relisting must also be current with their SEC reporting obligations, including timely filing of annual and quarterly reports. Addressing the specific issues that led to the initial delisting, such as rectifying past financial misstatements or demonstrating a successful business restructuring, is also part of meeting these criteria.

The Relisting Application Process

Once a company believes it meets relisting requirements, it can begin the formal application process with the desired exchange. This involves submitting a new listing application, which undergoes a thorough review by the exchange’s listing qualifications department. The application must detail the company’s business model, competitive landscape, and growth plans, demonstrating how past deficiencies have been addressed.

The exchange’s review can be extensive, often requiring additional disclosures or operational adjustments. This process can be lengthy, demanding significant effort and resources from the company, including legal and financial advisory services. If the exchange is satisfied that all requirements are met and the company has a viable plan for sustained compliance, final approval for relisting may be granted. This process underscores the commitment and financial stability a company must demonstrate to regain its position on a major public exchange.