The only thing delisting does is that the stock doesn't trade on whatever exchange it got delisted from. It would still exist and you would still own it. No one is going to pay you out. It would trade over the counter.
Delisting is a financial term describing a phenomenon where a listed security is removed from the exchange on which it trades. While it can happen for many reasons, it's usually not a good sign for the stock since it's likely failing to follow the exchange requirements.
Delisting can provide the company with greater operational flexibility. Public companies operate under the intense scrutiny of investors and market analysts, which creates pressure to deliver short-term results, typically reflected in quarterly earnings reports.
A delisted stock can theoretically be relisted on a major exchange, but it's rare. The delisted company would have to avoid bankruptcy, solve the issue that forced the delisting, and again become compliant with the exchange's standards.
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.
If you own securities, including stocks, and they become totally worthless, you have a capital loss but not a deduction for bad debt. Worthless securities also include securities that you abandon.
If you still hold shares after they are delisted, you can sell them—just not on the exchange on which they traded before. Stock exchanges are very advantageous for buying and selling shares. When they delist and trade over the counter (OTC), selling shares and getting a reasonable price for them becomes much harder.
delisting will lead to a saving of the listing fees and will free the company from listing rule restrictions. If there is little trade in the company's shares and the company is unlikely to raise new capital in public markets, the usual benefits for the company of being listed may be minimal.
A company whose shares have been delisted from an exchange, whether voluntarily or involuntarily, could potentially apply to get them relisted once again. However, the relisting process can be very challenging and may even require the company to meet all of the listing requirements once again.
As explained above, technically and legally you can claim capital loss on delisted shares only on extinguishment of your rights in shares as extinguishment is treated as transfer but there are practical difficulties when your try to fill up your ITR form for claiming such losses.
A company's shares listed on Nasdaq are required to maintain a closing bid price of no less than $1.00 per share (Minimum Bid Price Requirement). If the closing bid price of a company's shares are below $1.00 for 30 consecutive trading days, the company is considered to be in violation of Minimum Bid Price Requirement.
The Impact of Delisting on Investors
However, a delisted stock often experiences significant or total devaluation. Therefore, even though a stockholder may still technically own the stock, they will likely experience a significant reduction in ownership. In some cases, stockholders can lose everything.
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.
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.
The value of shares doesn't automatically rise or fall with a delisting, but when an involuntary listing takes place, it's often a sign that a company is approaching bankruptcy. In this case, there's a chance investors might lose their investment.
Delisting of shares can significantly impact the shareholders' holdings as they have to sell the shares even if they do not want to. Furthermore, once the shares are delisted, they lose their value and may result in losses for the investors in case they aren't sold at the right time.
A publicly held company may deregister its equity securities when they are held by less than 300 shareholders of record or less than 500 shareholders of record, where the company does not have significant assets.
The Bottom Line. A delisting does not directly affect shareholders' rights or claims on the delisted company. It will, however, often depress the share price and make holdings harder to sell, even as thousands of securities trade over-the-counter.
You can use a capital loss to offset ordinary income up to $3,000 per year If you don't have capital gains to offset the loss. You can take a total capital loss on the stock if you own stock that has become worthless because the company went bankrupt and was liquidated.
If a stock is untradeable on Robinhood, you won't be able to buy or sell shares of it.
What happens if you own shares of the delisted company? If you own the shares after the company gets delisted, you are not allowed to sell the shares on NSE or BSE. However, you can sell the shares you own outside of the stock exchanges.
Your maximum net capital loss in any tax year is $3,000. The IRS limits your net loss to $3,000 (for individuals and married filing jointly) or $1,500 (for married filing separately). You can reduce any amount of taxable capital gains as long as you have gross losses to offset them.
If the security cannot be sold in the market, it may be possible to dispose of the worthless security by gifting it to another person who can be related or unrelated to you. If you gift the worthless security to a family member, you will need to ensure that the person is not your spouse or minor child.