Stock Exchange Delisting Rules
The New York Stock Exchange and the NASDAQ are the two major stock exchanges in the United States. Both impose strict standards to determine which companies' shares they will list. These are based on such factors as the value of the company, the price of its shares, and the number of shares and shareholders. Companies that fall out of compliance with these standards are generally given a chance to correct the problems, but failing this, their stocks are delisted from the major exchanges.
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New York Stock Exchange
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To list its stock on the New York Stock Exchange, a company generally must have at least 400 shareholders and 1.1 million publicly traded shares with a total market value of at least $60 million. The company also must meet other minimum financial criteria. Some of the standards a company may need to meet include pre-tax income of $10 million over the last three years, revenue of at least $100 million over the past 12 months or $75 million in total assets.
NASDAQ
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The NASDAQ also requires companies whose stock it lists to meet some of a range of a financial criteria. Some of the standards that may make a company acceptable to the exchange include pre-tax income of at least $11 million over the previous three years, cash flow of at least $27.5 million over the past three years or revenue of at least $90 million in the previous fiscal year. The stock of companies listed on the NASDAQ also must trade at at least $4 a share.
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Out of Compliance
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Companies that fall out of compliance with the NYSE's listing standards are generally given 45 days to present the exchange with a plan to come back into compliance within 18 months. The NASDAQ has a similar procedure where companies that fall out of compliance with listing standards may be allowed to continue listing their stock on the exchange if they present an acceptable plan to come back into compliance and carry it out.
Voluntary Delisting
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Sometimes companies apply to voluntarily have their stock delisted from an exchange. Companies may choose to do this if their business has been acquired and the vast majority of the stock is now in the hands of the new owner.
Effects of Delisting
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Stock that is delisted from a major exchange can continue to trade publicly on one of the smaller exchanges, such as the American Stock Exchange, or on an over-the-counter basis. The market for such stock is not likely to be as liquid, however, and the stock may not achieve as high a valuation as it would on a major exchange. The major exchanges' listing standards are meant to give investors confidence in the stocks the exchanges list. Some funds, by their bylaws, are only allowed to buy stocks listed on the major exchanges.
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