We all invest in shares and there are some nightmares associated with trading in stocks, one among these is if a company gets delisted. What would you do if a company gets delisted? What happens with your shares? Can you get them back? These questions come to our mind and in this article, we are going to answer all these questions.
What is delisting?
When a company successfully finishes its IPO, then it gets listed on the exchange. That process is known as listing. And when a company’s shares are removed from the stock exchange it is known as delisting, after delisting the company’s shares cannot be bought or sold, on any exchange in the country- such as NSE, or BSE.
Why does a company get delisted?
The shares of a company may get listed due to various reasons, the shares may get delisted from one or more than one stock exchanges in the country. Delisting may be voluntary or a compulsion. Some of the reasons why a company may get delisted are given below-
1. A company may get delisted due to insufficient market capitalization.
2. If a company fails to comply with regulatory authorities, then also it may get delisted.
3. If the company files for bankruptcy then also its shares may get delisted
4. A company may get delisted on its own.
5. Also, the court can order SEBI to delist companies.
If a company gets delisted voluntarily, it would have to buy at least 90% of its shares to get delisted, then you can sell your shares easily. But if it’s a compulsory delisting then selling your shares can be tough.
How to sell shares of delisted companies ?
As stated earlier, one cannot buy or sell shares of delisted companies. But there are methods by which you can sell these shares.
When a company gets delisted voluntarily – A company might get delisted voluntarily due to various reasons, many times companies that are doing well also get delisted voluntarily. When a company is getting delisted, you would receive an official letter from the company or acquirer, with a buyback offer. You may sell your shares at that price or bid a buy back price.
When a company gets delisted by authorities – In case a company gets delisted compulsorily, then an evaluator is appointed, who would fix a buyback price for shares. Earning profit on this buyback is usually not possible, as the company would have been delisted due to some fraudulent activity. One should share as soon as they get a chance in such a situation
What to do if you miss the buyback opportunity?
The buy-back window is available for a short period of time only, and there are chances that you might miss it. In case you happen to be one of so then you have a second chance, this window is open for 1 year after the company got delisted, you can sell your shares at the same exit as offered before to the promoters, as they are legally liable to buy those shares, there are chances that you would receive a good profit if you sell your shares to the acquirer.
What happens if you miss a second buy-back chance?
In case you miss the second buy-back then it is going to be tough for you. As of now, you would have to find an over the counter buyer for these shares, which is hard to find, and in case you find it isn’t sure that you would receive a fair price. These options are only available for voluntarily delisted companies, so make sure you stay updated with news in case your invested companies get delisted.
Are there possibilities of the company getting relisted?
Yes, there are possibilities of the company getting relisted, but it’s in the powers of SEBI to decide whether they get relisted. But there are some rules-
A voluntarily delisted company would have to wait for 5 years before getting relisted.
A company getting delisted by authorities, would have to wait for 10 years before they get relisted.
< Here given below are examples of some of the companies that go delisted voluntarily –
Ray ban sun optics India ltd.
Reliance media works
Panasonic Home Appliances India Company Ltd.
Here given below are examples of some of the companies that go delisted by authorities –
Cadbury India Ltd.
Kodak India Ltd.
Otis Elevator Company (India) Ltd.
Conclusion – In this article, we have explained every important detail about the delisting of companies. Hope now you can tackle the situation in case a company that you invested in gets delisted, but make sure that you keep a check on the latest news in case it gets delisted because once you miss the chance for selling them, it can be pretty tough to sell those shares.
What is delisting?
When a company successfully finishes its IPO, then it gets listed on the exchange. That process is known as listing. And when a company’s shares are removed from the stock exchange it is known as delisting, after delisting the company’s shares cannot be bought or sold, on any exchange in the country- such as NSE, or BSE.
Why does a company get delisted?
The shares of a company may get listed due to various reasons, the shares may get delisted from one or more than one stock exchanges in the country. Delisting may be voluntary or a compulsion. Some of the reasons why a company may get delisted are given below-
1. A company may get delisted due to insufficient market capitalization.
2. If a company fails to comply with regulatory authorities, then also it may get delisted.
3. If the company files for bankruptcy then also its shares may get delisted
4. A company may get delisted on its own.
5. Also, the court can order SEBI to delist companies.
If a company gets delisted voluntarily, it would have to buy at least 90% of its shares to get delisted, then you can sell your shares easily. But if it’s a compulsory delisting then selling your shares can be tough.
How to sell shares of delisted companies ?
As stated earlier, one cannot buy or sell shares of delisted companies. But there are methods by which you can sell these shares.
When a company gets delisted voluntarily – A company might get delisted voluntarily due to various reasons, many times companies that are doing well also get delisted voluntarily. When a company is getting delisted, you would receive an official letter from the company or acquirer, with a buyback offer. You may sell your shares at that price or bid a buy back price.
When a company gets delisted by authorities – In case a company gets delisted compulsorily, then an evaluator is appointed, who would fix a buyback price for shares. Earning profit on this buyback is usually not possible, as the company would have been delisted due to some fraudulent activity. One should share as soon as they get a chance in such a situation
What to do if you miss the buyback opportunity?
The buy-back window is available for a short period of time only, and there are chances that you might miss it. In case you happen to be one of so then you have a second chance, this window is open for 1 year after the company got delisted, you can sell your shares at the same exit as offered before to the promoters, as they are legally liable to buy those shares, there are chances that you would receive a good profit if you sell your shares to the acquirer.
What happens if you miss a second buy-back chance?
In case you miss the second buy-back then it is going to be tough for you. As of now, you would have to find an over the counter buyer for these shares, which is hard to find, and in case you find it isn’t sure that you would receive a fair price. These options are only available for voluntarily delisted companies, so make sure you stay updated with news in case your invested companies get delisted.
Are there possibilities of the company getting relisted?
Yes, there are possibilities of the company getting relisted, but it’s in the powers of SEBI to decide whether they get relisted. But there are some rules-
< Here given below are examples of some of the companies that go delisted voluntarily –
Here given below are examples of some of the companies that go delisted by authorities –
Conclusion – In this article, we have explained every important detail about the delisting of companies. Hope now you can tackle the situation in case a company that you invested in gets delisted, but make sure that you keep a check on the latest news in case it gets delisted because once you miss the chance for selling them, it can be pretty tough to sell those shares.