At What Point Is a Stock Removed From the Market?
A stock represents a proportionate ownership in a business. Stocks are perpetual securities, that is, they are issued to last as long as the corporation that they represent is in business. There is no maturity or expiration date. But no business lasts forever; they come and go all the time and so do the stocks that represent them. There are also situations in which a stock can be removed from the market although the corporation it represents continues to carry on in one form or another.
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Delisting
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In order to be traded, a stock must be listed on a stock exchange. Every stock exchange has its own listing requirements, such as minimum stock price, market capitalization and financial reporting. If a company fails to comply with a listing requirement, it receives a warning to bring its affairs back into compliance or risk delisting. If the company fails to adequately address the issue, the exchange will delist its stock. The stock will still represent an ownership stake in a business but will no longer trade on an exchange and there will be virtually no market for it.
Buyout
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When a public or a private company buys a publicly traded company, it does so by buying its stock. Once the transaction is approved and closes, the stock of the company being bought is removed from the exchange. Investors either receive cash for their shares or exchange them for shares of the buyer that continue to trade.
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Bankruptcy
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When a company declares bankruptcy, stock investors usually lose all their capital: the stock becomes worthless and is removed from the exchange. A company in bankruptcy can either be liquidated or reorganized. In liquidation, its assets are sold off to pay creditors; in reorganization, it may restructure its debt, get an infusion of capital and re-emerge on the market. The most prominent example is General Motors, whose stock began trading again in 2011 after the company went bankrupt in 2009 and its stock was delisted.
Voluntary Delisting
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Stocks can be listed on multiple exchanges, for example in the U.S., Germany, Canada, Japan or China. Every exchange has its own listing requirements, and the costs of complying with those requirements vary. Companies list their shares on a particular exchange to gain access to capital. They constantly compare the benefits of trading vs. compliance costs. A company may decide to voluntarily delist from one exchange while keeping its stock listed on other exchanges when it feels that the cost of listing compliance is too high compared to the benefit of continued listing. For example, Daimler Benz, the maker of Mercedes-Benz, is listed in Germany but is no longer listed in the U.S. because the company believed that the relatively small amount of trading in its shares in the U.S. did not justify the continued listing expenses, so it delisted its stock from the New York Stock Exchange.
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