What happens when stock gets delisted from stock market?

POSTED BY Anuradha Singh ON May 19, 2020 COMMENTS (25)

Today, we will see what exactly happens when a stock is delisted from stock market? What happens to the shareholders and how they get the money back for their shares?

To understand de-listing, first let’s understand meaning of “Listing”

So when a private company wants to be become a public limited company and offer its share to open public for buying and selling, then it has to get it registered with stock market and make its shares open to public and that is called as “listing”. Once a stock lists on the stock market, it then has to follow up various processes and comply with many rules and regulations.

De-Listing of Companies from Stock Exchange

Meaning of Delisting

When a company wants to de-register its stocks from stock exchange and no longer wants to let public buy and sell its shares, then it’s called delisting process. In most of the cases, the stock holders will get back the value of their shares on the price which is determined at the time of delisting.

There are two kind of delisting

Voluntary delisting

Voluntary delisting, as the name suggests happens when the company takes the decision of delisting themselves. It happens mainly because company does not see any benefit in keeping its shares on stock exchange and wants more control. In this case, the buyback price offered to the shareholders is more price than the prevailing stock price. Common reasons behind voluntary delisting are

  • Merger with another company
  • Looking for more control and simplification within company

Involuntary delisting

  • Involuntary delisting happens not out of choice, but when the situation forces for the delisting. When this happens, mostly the shareholders don’t get the good price, because anyways the stock prices must be at lowest levels. Some of the common reasons for involuntary delisting are
  • Violations of Regulations
  • Failure to meet the minimum financial expectations
  • Company is bankrupt or ceases its 0perations
  • No longer meets the listing requirement on stock exchange

How the investor gets their money back once the de-listing happens?

In case of Voluntary delisting

Understand that if its voluntary delisting, then it’s happening because the company wants it to happen. In this case, there is enough time for shareholders to get back their money and it’s mostly the transaction between the promoter and shareholders. In this case, you can expect to sell your shares back to promoters at premium price.

There is around 1 yr. of time for shareholders to get back their money and it happens through a process called as “Reverse book building” process

In case of Involuntary delisting

When involuntary delisting happens, it’s a case of violation of norms/regulations most of the times and it sends a negative shock among stock holders. Most of the times, the stock is already quoting at a lower price. In this case, whatever price is offered by company, it’s suggested to take it and close the matter.

In any kind of listing, it’s not suggested to wait for future listing of the company because you have no idea when it will happen again. It might never happen. Also it gets very tough to find a buyer off the market and get a good deal.

Recent delisting case of Vedanta Ltd

Let’s talk a bit about the recent case of Vedanta Ltd delisting news. Recently, Vedanta Ltd has decided to delist from stock exchanges because of “Corporate simplification”. They feel it will enhance operational and financial flexibility in a capital intensive business.

It was a case of Voluntary Delisting, and hence there is enough time for delisting process and shareholders don’t have to panic at all. The company has decided to buy out the minority and non-promoters shares back from public. They have proposed an “indicative offer price” of Rs 87.5 a share which is around 10% more than the closing market price last of 79.6.

Now the next set of process will follow, but you don’t need to get into details. The point is that the delisting will happen and shareholders will get a good exit.

Here is a small list of few companies which got delisted in the last 10 year from BSE

  1. Maharaja Shree Umaid Mills Ltd on Feb 2, 2015
  2. Shantivijay Jewels Ltd on Jan 20, 2015
  3. Novopan Industries Ltd on Nov 10, 2014
  4. Vishnu Sugar Mills Ltd on Jun 30, 2014
  5. English Indian Clay Ltd on Jun 4, 2014
  6. Rhodia Speciality Chemical India Ltd on May 28, 2014
  7. Reliance Media Works Ltd on May 6, 2014
  8. Reliance Broadcast Network Ltd on March 28, 2014
  9. Gujarat Organics Ltd on Jan 9, 2014
  10. Chettinad Cement Corporation Ltd on July 8, 2013

Hope you all have understood the various aspect of delisting of a company from the stock exchange. If you all have any questions, you can put across in the comment section and I will get back to you on your queries asap.

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25 replies on this article “What happens when stock gets delisted from stock market?”

  1. UPEN R. CHOKSI says:

    I am holding 30 shares of M/s. Atlas Copco (I) Ltd. When company was de-listed few years back with handsome premium, I could not found my shares. Now shares are lying with me in physical form. Also I am regularly getting Dividends every year. At the same time I am receiving offer from some brokers specialised in such matter to buy my shares in DEMAT form at the price which is half the last offered price by company (Atlas Copco).

    I have also shares of Epiroc Mining (not listed) which got in physical form.

    What should I do? How can I DEMAT my shares?

    1. Jagoinvestor says:

      I suggest sell the shares at what ever price you are getting right now. The only other way to get out of it is to find another buyer or wait for the company to get listed.

      Or keep the shares forever …

      Manish

  2. Nalini Shantharam says:

    Looking in to the fundamentals of Vedanta Limited, is it advisable to decline the management offer? In the reverse price building what is high price (%), I can quote to the offer price?

    1. Jagoinvestor says:

      Do you want to keep the shares even after delisting?

  3. Nalini Shantharam says:

    In case I don’t accept the offer of vedanta, what happens next in the event of delisting by the Company? If I hold on to the shares are there any chances of selling the shares at a later date for a better price?

    1. Jagoinvestor says:

      Almost no chances..

      How will you find the buyer? You will have to either wait for another buy back offer from company (which may or may not come) or wait for relisting..

  4. S c Gupta says:

    A big loss if Price is fixed as Rs 87.5 per share. I have bought 100 shares @ 185.05 +broker’s charges.The cost price is nearly Rs. 186 per share.Suggest some remedy.

    1. Jagoinvestor says:

      At this moment, you have no remedy. All you can do is not sell the shares and wait for future listing (which may never happen or may happen after 10-20 yrs)

  5. Anand P Gupta says:

    Pl advise what action needs to be taken now or later regarding delisting of Vedanta shares held by me in De mt for,

    @2 Would they remit the value of the hares directly into my demat linked SB account

    When and what action do I take if I hear nothing from the Vedanta Co, ay for three months from now.

    Would they pat any interest / dividend for the period the Share / Share value remained with Vedanta

    Thanks and regards

    1. Jagoinvestor says:

      Yes, mostly the money will come to your account directly. Wait for communication from Vedanta side.,

      Manish

  6. Rajender Kumar Bansal says:

    What happens if the share holder does not accept the offer for delisting in Voluntary case initially, how can he get the value of his shares subsequently (i.e any other offer made thereafter at a higher value)

    1. Jagoinvestor says:

      Already mentioned in article. You either find a buyer manually (which is next to impossible) or wait for listing of company again on stock market.

      Manish

  7. Lawrence says:

    How do I get rid of non tradable stocks lying in my portfolio?

    1. Jagoinvestor says:

      You cant .. YOu need a buyer to sell it ..

      Manish

  8. Krishnan PS says:

    I have some shares of companies where trading has been permanently suspended and company has been wound up, and these shares are in loss. How can i account for suspended scrips as part of my Income Tax filing to claim capital loss benefits

    1. Jagoinvestor says:

      You have to consider them as ZERO and claim full loss. The fact that company has wound up means your loss is 100%

  9. Ravinder Kumar says:

    Vedanta is opportunistic desisting. Company appears to have chosen the time when most share prices are low due to Covid 19. The price offered is lower than the prevailing price and less than half of book value. Is it not cheating the retail share holders ? In my opinion SEBI should investigate and stop such frauds.

    1. Jagoinvestor says:

      DELISTING is allowed as per SEBI .. This is not fraud.

      When you buy a share, this risk is always there.. And you still have a choice to be share holder of that company and not sell . Its not a forced buy back.

      Manish

  10. VIMAL SHARMA says:

    HI THIS ARTICLE HELP ME TO UNDERSTAND THE PROCESS OF DELISTING
    BUT MY QUESTION IS, IF ANY SHAREHOLDER NOT INTEREST IN RETURN ITS SHARE TO THE PROMOTERS OR NOT INTEREST TO TAKE PARTICIPATE IN BUY BACK.
    THEN WHAT WILL BE HAPPENED , THE SHARE HOLDER STILL BECOME THE SHAREHOLDER OR GETTING THE DIVIDEND IF THE COMPANY ISSUE AFTER DELISTING
    OR THE COMPANY GET THE SHARE HOLDERS RIGHTS FORCE FULLY
    PLS SUGGEST

    1. Jagoinvestor says:

      Everything remains the same except that you don’t have STOCK MARKET Access for buying and selling.. If you want to buy more shares, or sell some shares, you have to find buyer on internet or through some other means..

      Manish

      1. Arun Chouhan says:

        What if I don’t sell the shares back. Though I don’t have a large number just 100 shares bought at Rs. 68 I was mainly interested in dividend. If I don’t sell would I receive dividends?

  11. Pankaj revri says:

    Is Gitanjali gems delisted? How and where can I sell my 5,000 shares of gitanjali gems? What price I can fetch for these share? Please help.

    1. Jagoinvestor says:

      I think its delisted now from stock exchange.. Tough to sell it in open market ..

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