Why does a company get delisted from the stock market?There are...

Why does a company get delisted from the stock market?

There are two ways in which a company can be delisted from a stock exchange – voluntary and forced.

Voluntary delisting

Voluntary delistings occur when public companies choose to delist from an exchange, usually resulting in that company trading privately again. However, sometimes companies delist simply to move to another exchange.

Companies may want to delist for a number of other reasons:

• Reduce costs. It’s expensive to trade publicly. The costs to ensure compliance with regulators and laws can be enormous, so smaller companies might find it’s not worth it to trade publicly
• Make short-term profits. If a stock trades below its intrinsic value, the company may repurchase its own shares to profit over the short-term before delisting. This can also produce rewards for current shareholders, giving them considerable returns
• Undergo a buyout. When a company is acquired, the new controlling shareholders may want to make the company private
• Reduce decision-making time. Making decisions in a publicly traded company can take a lot of time, as the shareholders and the board of directors may both be able to vote. By removing the approval from shareholders for decision-making, companies can pivot faster

There are, however, disadvantages to voluntary delisting. If a company needs funding, they won’t be able to raise money through public markets. And, customers may see delisting as a sign of trouble in a company, even if it’s voluntary, potentially leading to a loss of market share.