When a company gets delisted on NSE (National Stock Exchange) and BSE (Bombay Stock Exchange) under any circumstance, you still hold ownership in the company, but you cannot trade them on NSE and BSE.
To sell them, you need to seek buyers outside the stock exchange.
Types of Delisting
In the case of voluntary delisting, where the company is going private, the company would offer to buy back your shares. In such a case, it is advised to sell the shares instead of choosing the risk of waiting for them to get relisted.
According to SEBI (Securities and Exchange Board of India), the company has to buy back the shares from the holders within a year of the delisting resolution.
Forced or Compulsory Delisting
This happens when the company fails the compliance and is delisted as a result. In this case, you need to look for suitable buyers and sell off your shares. Sometimes, you might be lucky to strike a good deal. At times, people fail to find a buyer and wait for years, for the company to get relisted.
Forced de-listing leaves investor no options but to sell at whatever price is decided, which may be less than the actual value.
There are brokers who deal in unlisted/delisted shares. The bid/ask spread is usually wide and liquidity is an issue without a doubt.
The reason the company has been delisted
When a company is delisted, its stock no longer trades on one of the major stock exchanges. In a direct sense, nothing happens to a shareholder when delisting occurs. The shareholder still owns the same percentage of the company as before, and he is free to sell the shares to any willing buyer. However, in financial reality, the delisting of a company is usually a huge negative. It often occurs after a company goes bankrupt or as it approaches bankruptcy.
When you buy a stock, you own it until you either sell it or, in some cases, the company redeems it from you. If a stock gets delisted, you don’t have to hand over your ownership rights. However, those rights often become worthless. In many cases, delisting occurs due to corporate bankruptcy, which typically wipes out original shareholders in favour of newly issued stock. Even if you hold on to your delisted shares, you often won’t receive any shares in the company when it emerges from bankruptcy.
Decline in Value
Before a stock gets delisted, an announcement is made to the marketplace. Sometimes, a company will voluntarily delist its shares and make the announcement itself, but other times an exchange will announce that a company no longer meets its listing requirements. Because a delisted stock can be hard to sell, many investors will sell after a delisting announcement, driving the price down. This is particularly true in cases of bankruptcy, where there is usually no use in holding on to the delisted shares.
Decline in Liquidity
If you are a shareholder in stock, you are free to sell the stock to whoever will buy it. Your trade does not necessarily have to occur in a stock exchange. However, one of the main reasons for the existence of the stock exchanges is to provide liquidity for investors. Liquidity refers to the availability of buyers and sellers in a particular stock. Normally, when you want to sell a stock, you simply enter an order with your broker, and your shares find their way into the hands of a willing buyer. If your stock gets Delisted, it will usually trade on the “over-the-counter” market, which doesn’t provide easy access to buyers. It could become difficult, if not impossible, to sell your stock.
In some cases, a stock getting De listed might actually turn out to be a good thing for shareholders. If a company decides to go private instead of remaining publicly traded, it is essentially buying out existing stockholders. In exchange for your shares, the company will offer you cash. After the buyout, the shares will be Delisted. If you don’t accept the buyout offer, you will keep your shares but they will become worthless upon Delisting.
Options that you have after Delisting
If a firm is delisted, it does not mean the equity you possess become worthless. Those units are still worthy and if that company is making profits, you may even receive dividends too. You can have the following options :
Wait for relisting
It might be possible for the company to be relisted if it complies with the SEBI guidelines. Once it is done, you can sell your holding through the market.
Check regional stock exchanges
You should check if the company is listed in any other regional stock exchange.
Sell through brokers
There are brokers and companies who are ready to buy your delisted stocks and the price will be decided by them.