What Happens When a Stock Is Removed From the List?
Each year, the shares are suspended and removed from the lists of various exchanges. While this is not uncommon, it is not exactly what you would like to experience as an investor. Because the main question is: what happens to your money?
The SEC may suspend trading if it believes it is in the public interest to do so. This includes the following situations :
- Lack of up-to-date, accurate or adequate information about the company, for example, when the company does not submit periodic reports on time;
- Questions about the accuracy of publicly available information, including in press releases and company reports, the current operating condition, financial condition, or business operations of the company;
- Questions about stock trading, including insider trading, potential market manipulation, and the ability to clear and settle stock trades.
While the stock can trade again after the suspension is lifted, sometimes the stock is dropped from the exchange and this is bad news for your portfolio.
Why? We are not talking about privatizing the company, which could be a good form of exclusion from listing. In this case, it is likely a sign that something is wrong with the company you are investing in. While you do not “lose” your money right away – you are still formally a shareholder – it is possible that the stock will become essentially worthless.
“Although the intrinsic value of the shares has not changed since the day before the shares were taken off the list, the very fact that they were dumped from the stock exchange is enough for market factors to push their price even lower to the level of water,” writes The Street . “The stocks that you once paid for with your hard-earned money are now probably nearly worthless.”
This does not mean that you should rush to sell and cut your losses. If the company takes action, it is possible that the shares could be re-listed. Chances are, you’re out of luck if the company files for bankruptcy.
If you are interested in shares but the company has been suspended in the past, the SEC recommends the following steps:
- Research a company : Always research a company before buying its stock, especially after trading has been suspended. Consider the finances, organization, and perspective of the company.
- Check out the company’s SEC documents : this information is free and can be found in the Commission’s EDGAR registration system .
- Be skeptical: Investors should always ask why someone is giving them hot tips. Investors should also do their own research and be aware that information from online blogs, social media sites, and even a company’s own website may be inaccurate and sometimes deliberately misleading:
You can see the recent trade interruptions here .