What’s an untradeable stock? | Robinhood (2024)

FAQs

What’s an untradeable stock? | Robinhood? ›

Securities can be untradeable for a few reasons, including: The exchange has paused trading for it. It's been delisted from the major exchanges and trades in the over-the-counter (OTC) market. It's a foreign security, which we don't support.

If you have an open position on a stock that delists and is in liquidation, we'll close your position at a level of zero and typically open a new position – called a 'proceeds line' – on your behalf which is untradeable, has no price and brings no value to your account.

This happens when these securities do not have an active secondary market or it is difficult/impossible to trade them over the counter for a prolonged period of time. Non-tradable securities are typically expected to be and remain near or entirely worthless.

If for whatever reason you cannot sell the worthless shares, then you will need to obtain documentation that will convince the IRS that the stock really, truly had no value at some point in time, and close the position at that same time. This will relieve you of the burden of selling the shares.

A stock is delisted when it's been removed from the stock exchange. You can't trade delisted stocks with Robinhood. You can learn more about what to do if you own a delisted stock in Mergers, stock splits, and more. An exchange-traded fund (ETF) is a group of assets pulled together that trades like a normal stock.

Though delisting does not affect your ownership, shares may not hold any value post-delisting. Thus, if any of the stocks that you own get delisted, it is better to sell your shares. You can either exit the market or sell it to the company when it announces buyback.

The suspension of the shares will have an influence on its value, however, it does not exactly mean that the value of the stock will turn zero. It only results in a ban on trading in an exchange. Suspension on the shares can be revoked if the company manages to comply with all the regulations of the exchanges.

If you own delisted shares, you can still sell them on the Over-the-Counter Bulletin Board (OTCBB) or on the Pink Sheets, which have more relaxed regulations and few listing requirements. OTC trading is volatile, and this level of risk is typically not suitable for beginning investors.

When a stock is delisted, options trading on that stock typically ceases. This means that options holders are no longer able to buy or sell their options on the open market. However, they still have the right to exercise their options if they choose to do so.

If a company delists voluntarily, its share price can increase depending on the reasons for the privatisation. In this case, a trader can open a position to 'buy' (go long) if they think the share price will increase. If the company is forced to delist, it often spells bankruptcy or causes investors to lose confidence.

How to get money from delisted shares? ›

The corporation must honour the delisting price. If the firm has been delisted for more than a year, the shareholder might approach the company and negotiate a private sale of the shares to the promoters. This will be an off-market transaction, with the price agreed upon by the seller and buyer.

Yes, a delisted stock can be re-listed on a major exchange like the NYSE or Nasdaq if the company subsequently meets all of the exchange's listing requirements. This typically involves getting the stock price above the minimum threshold, meeting financial benchmarks, and filing up-to-date financial reports.

What happens when an investor maintains a short position in a company that gets delisted and declares bankruptcy? The answer is simple: The investor never has to pay back anyone because the shares are worthless. Companies sometimes declare bankruptcy with little warning. Other times, there is a slow fade to the end.

If a stock becomes delisted, the liquidity drops immensely. In fact, they are considered illiquid. In many cases, they are untradeable on most brokerage platforms that don't support OTCBB or Pink Sheets trading.

Technically the IRS requires that a stock be totally worthless before you are entitled to a deduction. Some delisted stocks still trade in other markets which means they're not totally worthless as the iRs requires.

Penny stock companies are those whose stock trades at $5 or less. They face delisting if their stock drops below $1, but Nasdaq's rules give them leeway to stay on the exchange for almost two years rather than be delisted, after which they can only be traded in the over-the-counter market.