What happens to shareholders when a company is delisted?

We frequently hear about businesses wanting to be listed on stock markets; nevertheless, the opposite is also true. Many times, businesses want to stop offering shares on the market.

This phenomenon is known as delisting. You've probably heard about Vedanta's delisting in the month of June. Vedanta, which was listed on both exchanges, voluntarily delisted its stock from the stock market.

So what are delisted shares?

Delisted shares 

are shares of a publicly traded firm that have been permanently withdrawn from the stock market for the purpose of purchasing and selling.

Delisted shares will no longer be traded on the National Stock Exchange (NSE) or the Bombay Stock Exchange (BSE). The Securities and Exchange Board of India (SEBI) regulates the process of delisting securities for any corporation. Depending on the reason for delisting, it might be voluntary or involuntary.

A company's shares might be delisted from an exchange for a variety of reasons, including a lack of market capitalization, a stock price that does not meet the required level, insolvency, inability to comply with exchange regulatory criteria, mergers and acquisitions, and so on.

Are you concerned about what will happen to your shares if the company is delisted? You still hold a portion of the company’s stake based on the number of shares you own. However, those shares are not eligible for sale on the National Stock Exchange (NSE) or the Bombay Stock Exchange (BSE).

Selling, on the other hand, can be done on the over-the-counter market, which means you can find a buyer outside of the stock exchange.

Also read - Adani Power Delisting

There are two options for the shareholders

1. Reverse Book Building is a great way to get rid of your shares.

Through a reverse book building procedure, the promoter or acquirer will buy back the shares. Promoters must make a public notice of the repurchase by sending a letter of offer and a bidding form to eligible shareholders.

In this situation, eligible shareholders can take advantage of the delisting offer by tendering the shares through appropriate stockbrokers. The final price is determined by the price at which the highest number of shares were offered.

The promoter will have the option of considering or ignoring the pricing. All genuine offers up to the final price are accepted if the promoter accepts the pricing.

Delisting is considered successful when the number of shares tendered by public shareholders reaches the regulatory limits. If the given limit is not met, the company will stay listed.

The remaining investors will be able to sell their shares to the promoters. The promoters must accept all of the shares at the same final price. This is allowed for a period of one year from the date of delisting.

2. Wait for a buyer to come through.

You can keep your shares until you find a buyer on the over-the-counter market if you haven't sold them back during the reverse book building process or during the exit window period.

The delisted share may be difficult to sell, given the lack of liquidity due to the lack of over-the-counter transactions. When selling on the over-the-counter market, however, all you need is time. Finding a buyer willing to buy at the appropriate price can take a long time.

When a firm decides to delist for commercial purposes, it normally offers its investors a buyback at a higher price, which might result in a considerable profit.

However it's crucial to remember, that this is only a temporary opportunity for investors to profit. The stock's price is anticipated to fall once the buyback window closes.

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