Anuradha Singh

May 19, 2020

What happens when stock gets delisted from stock market?

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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34 Comments
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Jagdish
Jagdish
2 years ago

Sir I have 500 share for reliance media works ltd,now its delist so what I should do it,what it will demer or relist in future time

Jagoinvestor
Admin
Reply to  Jagdish
2 years ago

One cant guarantee about relisting. As fo now you cant do much

ATHIKARATH VISWANATHAN
ATHIKARATH VISWANATHAN
3 years ago

I have 100 shares of NAYARA ENERGY Limited and 50 shares of HEXAWARE Technologies – both are in my ICICI Securities demat account. Both are delisted now. I wish to dispose the entire holding of both companies. Kindly advise me how to do it and get my money. Thank you. Viswanathan

Jagoinvestor
Admin
Reply to  ATHIKARATH VISWANATHAN
3 years ago

You cant.

Either you need an offline buyer who is ready to buy from you or if there is a buy back offer from company.

Manish

A.Narwade
3 years ago

This is a much-needed article. I own MTZ POLY FILMS LTD. stocks which got delisted almost 9-10 years ago but I do not see any communication in the past to encash those shares and now also no news/article about this company. Can you guide me here? If I get my money back I will enroll in one of your services.

Jagoinvestor
Admin
Reply to  A.Narwade
3 years ago

I guess its closed down and money is lost.. Better check with Registrar of companies..

Rahul Raghavan
Rahul Raghavan
3 years ago

will we get dividends if we decide not to sell the shares?

Jagoinvestor
Admin
Reply to  Rahul Raghavan
3 years ago

Yes.. dividends will be paid to you !

Manish

Deepak
Deepak
Reply to  Rahul Raghavan
3 years ago

Sir, what happens when company is suspended from sharemarket. I purchase some shares in PSL LTD, from Oct mid onwards the company is suspended. If I email to company, I didn’t get any response from company side.how I will sell my shares. What is the meaning of liquidation suspension. Please explain.

UPEN R. CHOKSI
UPEN R. CHOKSI
4 years ago

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?

Jagoinvestor
Admin
Reply to  UPEN R. CHOKSI
3 years ago

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

Nalini Shantharam
Nalini Shantharam
4 years ago

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?

Jagoinvestor
Admin
Reply to  Nalini Shantharam
3 years ago

Do you want to keep the shares even after delisting?

Nalini Shantharam
Nalini Shantharam
4 years ago

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?

Jagoinvestor
Admin
Reply to  Nalini Shantharam
3 years ago

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..

S c Gupta
S c Gupta
4 years ago

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.

Jagoinvestor
Admin
Reply to  S c Gupta
3 years ago

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)

Anand P Gupta
Anand P Gupta
4 years ago

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

Jagoinvestor
Admin
Reply to  Anand P Gupta
3 years ago

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

Manish

Rajender Kumar Bansal
Rajender Kumar Bansal
4 years ago

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)

Jagoinvestor
Admin
Reply to  Rajender Kumar Bansal
3 years ago

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

Lawrence
Lawrence
4 years ago

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

Jagoinvestor
Admin
Reply to  Lawrence
3 years ago

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

Manish

Krishnan PS
Krishnan PS
4 years ago

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

Jagoinvestor
Admin
Reply to  Krishnan PS
3 years ago

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

Ravinder Kumar
Ravinder Kumar
4 years ago

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.

Jagoinvestor
Admin
Reply to  Ravinder Kumar
3 years ago

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

VIMAL SHARMA
VIMAL SHARMA
4 years ago

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

Jagoinvestor
Admin
Reply to  VIMAL SHARMA
3 years ago

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

Arun Chouhan
Arun Chouhan
Reply to  Jagoinvestor
3 years ago

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?

Jagoinvestor
Admin
Reply to  Arun Chouhan
3 years ago

Yes you will ..

Pankaj revri
Pankaj revri
4 years ago

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.

Jagoinvestor
Admin
Reply to  Pankaj revri
3 years ago

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