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Why do companies delist from the stock market?


Over the past few years, I have delivered content on IPOs, listing by way of introduction, secondary offerings. These are all ways for companies to list and have their shares in the stock market. 


Delisting is the opposite, delisting actually means that the company would remove it shares from the stock market and it would move from a Publicly traded company into a Privately traded company


There's a variety of reasons on why companies get delisted in a stock exchange.  


Let me address one item though, when a company delists it does not mean it is bankrupt or the company is not earning anymore. Similiar to the ABS franchise issue, I got a lot of messages asking if ABS CBN would delist because they would lose their franchise. This post is to give you 3 reasons on why companies would delist and I hope it brings you enough information that you trade and invest based on data on not just noise. 


REASON ONE


One reason is they would delist just because they would want to make the company private once again for the reason of they just want to control everything internally without the scrutiny of the public. That's what Micahel Dell did in 2013 when he brought Dell Computers back into a private company.


REASON TWO


Another reason for delisting is when companies fail to meet the requirements of the stock exchanges that they are listed on. That's what happened to RWM in 2019, when it failed to meet the required public float of 10%.  That is what also is happening right now to Pepsi. Pepsi announced that they will be delisited from the Philippine Stock Exchange as their float is currently at 7.9% and won't be able to comply by the December 18, 2020 deadline set by the PSE to have their float raised to 10%.


For the first two reasons, normally a tender offer is given as a chance for investors to liquidate and sell their shares so they can get out of the position. This is a chance for the investors to swap their shares into cash before the company turns private once again. 


REASON THREE


Last reason and among the other reasons, this is the most negative. Stocks get  delisted as a form of sanction or punishment because they violated certain rules in the stock exchange. That is what happened to Calata ([ Ссылка ]) in 2017 when they violated a lot fo disclosure requirements and trading restrictions set by the Philppine Stock Exchange. This is the hardest because this hits a lot of small retail investors who would not be able to go out and sell their shares. 


WHAT HAPPENS TO INVESTORS WHEN A COMPANY DELISTS?


If the company is running good and well and is giving out dividends then you are still a part owner of a company that is running good and well. The only problem is you become a part owner of a private company thus getting out, access to info, data, research, would also be harder to come by. It would also be harder for you to sell your shares at the price that you want because there won't be an open market where you can sell your shares readily and easily. It also will require more paperwork and time to get out of your shares, assumung that you have a buyer for your shares unlike in the stock market where you could do everything in just a few seconds and with lesser taxes and fees.


The problem is if the company is in trouble financially and is not doing so well, you may have a hard time to get out if the company is private cause for sure it would be harder to convince someone to by the shares from you.

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