Doing a little reseach on Delisting:
(1)It is possible for a company to be delisted and still be profitable. However, delisting can make it more difficult for a company to raise money, and in this respect, it sometimes is a first step towards bankruptcy. For example, delisting may trigger a company's creditors to call in loans, or its credit rating might be further downgraded, increasing its interest expenses and potentially even pushing it into the red.
(2)As a shareholder, you should seriously revisit your investment decision in a company that has become delisted; in many cases, it may be better to cut your losses.
(3)A firm unable to meet the listing requirements of the exchange upon which it is traded is quite obviously not in a great position.
(4)Even if a company continues to operate successfully after being delisted, the main problem with getting booted from the exclusive club is the trust factor. People lose their faith in the stock. When a stock trades on the Nasdaq, it has an aura of reliability and accuracy in reporting financial statements. When a company's stock is demoted to the OTCBB or pink sheets, it loses its reputation. Pink sheet and OTCBB stocks lack the stringent regulation requirements that investors come to expect Nasdaq traded stocks. Investors are willing to pay a premium for shares of trustworthy companies and are (understandably) leery of firms with shady reputations.
(5)Another problem for delisted stocks is that many institutional investors are restricted from researching and buying them. Investors who already own a stock prior to the delisting may be forced by their investment mandates to liquidate their positions, further depressing the company's share price by increasing the selling supply. |
