What happens to investors when stock is delisted?
When a company delists its shares from a stock exchange, it is no longer possible for the shareholders to sell their stock to others through the stock exchange. This makes it difficult for small shareholders to exit. If they continue to keep the stock, they receive only the dividends that are declared by the company. This is the reason why most stock market regulators have rules which state that if a company is delisted by a majority shareholder from all national stock exchanges, the majority stakeholder has to offer an opportunity for smaller stockholders to sell their stock to it at a price that is determined using methods that have been defined by the regulator. Usually a method called reverse book- building is used to arrive at this price.
