delist

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Delisting

The removal of a stock from trading on an exchange. Delisting occurs when a publicly-traded company violates the exchange's rules, or, more commonly, when the company ceases to meet listing requirements. For example, when a company's market capitalization falls below a certain level, it is in danger of delisting.

delist

To drop a security from trading on an organized exchange. Delisting may occur for a number of reasons including failure to meet an exchange's standards or placement of a new listing on another exchange. Compare list.
Case Study In early 2001, Nasdaq informed Drkoop.com, a one-time high-flying Internet company, that the firm's stock was subject to being delisted from the Nasdaq Stock Market. At the time of the notice Drkoop.com stock was trading at approximately 20¢ per share, well below the $1 per share required to continue trading on the Nasdaq. Delisting can have a serious negative impact on a firm's ability to raise equity capital, since it is likely to reduce liquidity and increase the bid-ask spread quoted by dealers. Many individual investors avoid buying a delisted stock as trading volume dries up. Negatives associated with delisting are likely to cause a major decline in the market price of a stock that most likely has already experienced a major price decline. Nasdaq, which delisted 240 companies in 2000, often begins the delisting process when a stock's bid price falls below $1 per share for 30 consecutive trading days. The firm subsequently has 90 calendar days to boost its stock price above $1 per share for 10 consecutive trading days. The New York Stock Exchange has a similar price requirement plus additional minimums regarding market capitalization and shareholder equity.
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Overall, manufacturing industries comprise about 30% of firms in the Compustat universe that did not delist, while almost 45% of firms that delisted are in these industries.
Prior to the year of delisting, what were the financial characteristics of the firms that delisted?
The general impression about a "delisted firm" might be of a firm in severe financial distress that has run out of cash, but the statistics do not support that idea.
In Table 2, which shows descriptive financial data for delisted companies in the year prior to delisting, we find lower mean values for cash, total assets, revenue, and net income for involuntarily delisted firms compared to voluntarily delisted firms, which have lower market values and cash as a percentage of total assets.
In contrast, voluntarily delisted firms have lower median values for cash, total assets, revenue, and market value compared to involuntarily delisted firms, which have lower net income.
Was it more likely that a firm delisted involuntarily or voluntarily?
A total of 293 firms (62.7%) delisted involuntarily, while 174 firms (37.3%) delisted voluntarily.
As mentioned previously, one reason a firm might choose to delist is to switch to a different exchange (see Table 4).
With a few minor exceptions, firms that delist involuntarily show a clear pattern between the three exchanges.
Descriptive statistics show that firms delisting involuntarily from AMEX are significantly smaller in terms of total assets (whether measured as the average or the median value) compared to firms that delist voluntarily from AMEX.
Firms that voluntarily delisted from NASDAQ were more likely to be smaller firms.
Most firms that voluntarily delisted cited switching to a new or different exchange as the reason (N = 130, 75%).
Disappearing act: insight for the management accountant on recently delisted U.S. companies

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