Delisting
Topic: Financial Markets, Instruments, Insurance and Pensions · NCERT: Beyond NCERT
Meaning
Delisting means permanently removing a company's shares from a stock exchange. After delisting, the shares can no longer be bought or sold on that exchange. It can be voluntary, when the company or its promoters choose to leave, or compulsory, when the exchange removes the shares as a penalty, for example for breaking listing rules. In India, the SEBI Delisting Regulations 2021 govern it. In a voluntary delisting, the exit price is found through reverse book building: the public shareholders say at what price they will sell, and the promoters buy at the price that emerges. A fixed-price option was added later. These rules exist so that small shareholders are not forced out at an unfair price.
Example
The promoters of a listed company want to take it private. They make an offer to buy out the public shareholders through reverse book building. Once enough shares are bought, the company's shares are removed from the exchange.
Don't confuse with
- Suspension of trading: trading in the share stops for a while but the share stays listed. Delisting is permanent.
- Buyback: the company buys back some of its own shares but stays listed.
Related concepts
- Dividend
- Bonus issue
- Stock split
- Buyback
- Minimum public shareholding
- Insider trading
- Front-running
- Short selling
- Securities Lending and Borrowing