Understanding Delisting
Delisting occurs when a project no longer meets the listing standards of an exchange.
There are various reasons behind delisting, including:
- Lack of regular trading activity
- Absence of protocol development
- Faulty network or smart contract reliability
- Non-existent business-to-customer interaction
- Proof of fraudulent or dangerous activity
Delisting Dynamics
Once a project is delisted, its asset can no longer be bought or sold on the exchange.
Delisting is typically permanent, although there may be exceptional circumstances where a project’s asset gets relisted.
A business may choose to delist voluntarily if it is purchased or becomes private.
On the other hand, involuntary delisting occurs when a company fails to meet the listing standards set by the exchanges where its assets are traded.
Listing Complexities
Listings requirements can be complex, with specific regulations for different types of issuers and securities.
These requirements often include prompt filing of financial statements, a minimum share price, a reasonable level of shareholders, a minimum market capitalization threshold, specific revenue, profit, cash flow, and trading activity prerequisites.
Reduced Investor Accessibility
Delisting can have significant implications as shares of companies not listed on popular exchanges are harder for investors to explore and purchase.
This means that the company may struggle to raise funds for new ventures by offering new shares to the market.
Delisting Factors and Relisting Potential
Reasons for delisting a stock can include impending bankruptcy, failure to submit obligatory reports, or share values falling below the exchange’s minimum threshold.
If the issues are resolved and the listing criteria are met, a company can request to have its shares relisted.
However, relisting a firm may not always be successful during its second term on the market, and investor sentiments can vary.
Delisting’s Protective Role
Delisting serves as a protective measure to prevent markets from being flooded with substandard securities from issuers nearing the end of their life cycle.
Exchanges help reduce systemic risk associated with the market and safeguard investors by ensuring that all issuers adhere to rigorous regulatory requirements.
In conclusion, each trading platform has its own set of rules, and it is advisable to follow those guidelines to avoid delisting.