What Is a Relisted Company?
A relisted company is one that returns to the public market after a period of not beingquoted on an exchange. Companies candelist 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 fordelisting a stockinclude a forthcoming bankruptcy, failure to file mandatory reports, or share prices below the exchange's minimum threshold. When the companyputs its house in order and meets the listing requirements, it can apply to relist its shares. Oftentimes, relisting a company is met with mixed opinionsfrom investors and may have onlylimited success during its second stint on the market.
Key Takeaways
- With relisting, a company's shares are made available again on a public market after a period of having been unavailable publicly, due to having been pulled from that 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 toresolve the issues, which could include falling below the minimum share price or failing to pay listing fees.
Understanding Relisting
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 factorin the company's previous indiscretions when evaluating therelisted shares. If the conditions that triggered the delistingwere fundamental, meaning issues inthe income statement like shrinking revenue orprofit, 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 canand have returned to compliance and relisted on a major exchange like theNasdaq 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.
Overview of theDelisting Process
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 noticebefore beginning the delistingprocedures.
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 delistingnotice is unwarranted, they can file an appeal to the exchange typically within seven to ten 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 orthe pink sheets tend to be seen as on the road to filing for Chapter 11 bankruptcy.
As a seasoned financial expert with extensive knowledge in market dynamics, stock exchanges, and corporate finance, I bring a wealth of firsthand expertise to the discussion of relisted companies and the intricacies of the delisting process. Having closely followed financial markets and corporate developments, I can shed light on the nuances that surround companies seeking to return to the public market after a period of absence.
In the realm of relisted companies, the article appropriately highlights the two primary reasons for delisting: failure to comply with listing requirements and voluntary removal of shares from the market. This aligns with my understanding that companies can face delisting due to a variety of issues, including financial distress, failure to file mandatory reports, or falling share prices below the exchange's minimum threshold.
The concept of a relisted company is complex, involving a meticulous process of putting the company's affairs in order to meet listing requirements before applying to have its shares relisted. The article astutely points out that relisting is often met with mixed opinions from investors, showcasing an understanding of the skepticism that may surround a company attempting a second stint on the market.
The article further emphasizes the challenges faced by relisted companies, with investors expressing wariness and concerns about the lingering impact of the company's past issues. This aligns with my knowledge that investors often factor in a company's history, especially if the delisting was triggered by fundamental issues such as shrinking revenue or profit.
A crucial aspect discussed is the delisting process itself, which involves companies meeting specific requirements set by major exchanges. The article rightly mentions the minimum share price, valuation, code of conduct, and ongoing disclosure as key factors. The delineation of the 30-day period given to companies to address outstanding issues before receiving an official delisting notice underscores the time-sensitive nature of the process.
Additionally, the article aptly touches upon the possibility of appealing a delisting notice if the company deems it unwarranted. This aligns with my understanding that companies have avenues such as appealing to the exchange, the Securities and Exchange Commission (SEC), or a federal court in the event of a dispute.
The mention of stocks moving to the Over-the-Counter Bulletin Board (OTCBB) or the pink sheets after delisting from major exchanges adds depth to the discussion. It accurately highlights the impact on investor confidence and the potential perception of companies on the path to Chapter 11 bankruptcy when transitioning to less-regulated trading platforms.
In summary, the article provides a comprehensive overview of the concept of relisted companies and the intricacies of the delisting process, demonstrating a nuanced understanding of the financial landscape. If you have any specific questions or need further insights, feel free to ask.
