A relisted company is one that returns to the public market after a period of not being quoted on an exchange. Companies can delist for two primary reasons: they fail to comply with various listing requirements, or they willingly remove shares from the market, as Dell did from 2013 to 2018.
Other potential reasons for delisting a stock include a forthcoming bankruptcy, failure to file mandatory reports, or share prices below the exchange’s minimum threshold. When the company puts its house in order and meets the listing requirements, it can apply to relist its shares. Oftentimes, relisting a company is met with mixed opinions from investors and may have only limited success during its second stint on the market.
Usually, a relisted company is one that was pulled from a public market due to bankruptcy, failing to fulfill an exchange’s requirements, or in some cases, voluntarily by the company.
Relisted companies are often met with wariness by investors, who perceive the shares as still being tainted by the company’s previous issues; however, there are instances when relisted shares are embraced by buyers.
A company subject to delisting for failing to meet an exchange’s requirements will typically have 30 days to resolve the issues, which could include falling below the minimum share price or failing to pay listing fees.
A relisted company, unlike a hot initial public offering (IPO), is often received with mixed reactions and may even weigh down share prices. Investors may factor in the company’s previous indiscretions when evaluating the relisted shares. If the conditions that triggered the delisting were fundamental, meaning issues in the income statement like shrinking revenue or profit, the stock’s appeal would likely fall even further.
Historically, few companies have reached similar highs or valuations after relisting shares, but it’s certainly not a death sentence. Many companies can and have returned to compliance and relisted on a major exchange like the Nasdaq after delisting.
To be relisted, a company has to meet all the same requirements it had to meet to be listed in the first place.
Listing on a major exchange requires companies to meet several requirements, including a minimum share price, a certain valuation of all publicly issued shares, a code of conduct applicable to all employees, and ongoing disclosure of all material news, among other factors. If a company fails to meet any of these conditions, the exchange will send a deficiency notice before beginning the delisting procedures.
The company usually has 30 consecutive days to address the outstanding problems before receiving an official delisting notice. Some requirements like falling below the minimum share price are difficult to fix but others like listing fees have a simple solution–pay the fee.
When a stock is delisted from a major exchange and moved down to the OTCBB or the pink sheets, you still own the shares you bought, but you may want to weigh whether you want to continue owning the shares, considering the challenges the company is facing.
If the company believes the delisting notice is unwarranted, they can file an appeal to the exchange typically within seven days of receiving the delisting letter. They can also appeal to the Securities and Exchange Commission (SEC) or a federal court in the event it fails to convince the exchange listing qualification panel.
Neither the OTC Markets Group nor the OTC Bulletin Board have listing standards, but the SEC still requires companies to file current material before issuing a stock over the counter.
When a stock is delisted from a major exchange, it will often move over to either the more regulated Over-the-Counter Bulletin Board (OTCBB) or the less-regulated pink sheets system. Dropping off of one of the major exchanges tends to result in a loss of investor confidence, and institutional investors may stop researching and trading the stock, giving individual investors less access to information. Stocks that are delisted and drop down to the OTCBB or the pink sheets tend to be seen as on the road to filing for Chapter 11 bankruptcy.