Article by Sherin Dev; Follow me in Twitter or Facebook
While searching in the net today, I have found number of people asking same question, 'what they want to do to sell their delisted company shares'. Some insights in this subject would be excellent, at least my readers, to understand about what they want to do if such situations arises to them. Here is a short article for all those want to know about this.
Before coming to the main subject, I took sufficient time to identify why such problem happens to some investors. How they reach to such position by having delisted shares in hand to worry on what to do next. Finally, I found the answer that the real problem is not with any delisting or delisted companies, but it is with the investors only!
There is a common belief among investors that, long term investments only meant investing in good stocks at right time and then forget it. Yes, you can buy good stocks and forget those investments for long term with an intention to generate wealth. I too agree. Even I have learned the same from the practice of great investors. But, If someone follow this advice straight by not fully understand the real inner meanings; they would certainly face troubles in future like having delisted shares.
Here is how it happening:
One can select a good stock to invest for long term. It doesn't mean he should forget all, but should keep an eye on the activities happening inside the company. Such information available through business channels, financial news papers or even directly visiting the information section in the respective stock exchanges. For example, if someone invested to a great company which have no debt, sufficient cash and have monopolistic products in the market. He may think this is a good investment for long term and no need to worry. This is a wrong approach. Remember, a company which doesn't have any debt and sufficient cash in hand is always in the radar of delisting candidates. No debt and sufficient cash in hand means the company doesn’t required money from public. Such situation may force them to think about delisting from their company. If such, they would advertise to public to bring their outstanding shares back by offering a good price more than what it has in the market at present. Any investor, who have not seen such advertisement or not monitoring the company, generally do not sell his shares before the stipulated time. Such shares later sit with him as delisted company shares!
Understand the common situation that forces companies to delist its shares
De-listing could happen from various reasons. Two most important reasons for such delist decisions, either the company went lock out or management decided to not go further as a public company. De-listing by first reason rarely happening, but the second can happen at any time. Any investor who invested on a delisting candidate should get enough time to return their shares back to the company by adding buy back advertisements publicly. If an investor misses that advertisement, he still has option to contact the company directly to submit his shares to en cash it. But, it is totally depends on company whether they want to accept such requests or not.
If a person who have shares of a delisted company which delisted due to lock outs, have no option to en cash his shares. If such, the only option is to wait for the company to re-establish again and list back to the stock exchange. If such happens, most companies accept its old shares back but not sure the price they are going to offer to their old investors!
There are other delisting reasons like stock exchange can take decisions to delist any company if they not meet required rules. If such, an investor still have option to sell his part of shares before the time the company disappears from stock exchanges list. They can even contact the company directly to sell his shares. A broker would be good contact point if such situation approaching to you.
What do you do if a delisting company offers fewer prices to your shares?
Identify the reason why the company is delisting. If it is delisting to close the operations, your only option is unload your shares by the present offered price. If a company delisted from a stock exchange, but still operational, you have the option to sell the shares through your broker once if anyone interested to buy those shares. If such, the seller should inform the company about the transaction. A broker could help investors on such issues. Once if you not sell such shares, you are still eligible to get dividends if company offers to its existing investors who have not sold the shares upon their delist information. But always remember, trust is the major factor in such situations.
As an investor, shouldn't forget your invested company after purchasing its shares at a right price. Instead, ensure you are receiving all the news’s about the company in time to time by using possible methods mentioned above. Investor can even configure Google alerts to receive information about any company, as it arrives to public. Financial papers, channels, stock exchange sites and trusted websites are best resources to get news’s about your company and its activities. Once the company got delisted and you have not received any information, the best option is to contact the company directly to clarify the options you have. Companies who still offer investors to hold the delisted shares are good, but remember this option have lack of liquidity. Shareholders might not be able to sell such shares at all and may be struck with them for eternity. However, these shareholders will continue to enjoy all shareholder rights such as voting rights and right to receive dividend along with other benefits arising from various corporate actions.
Article by Sherin Dev; Follow me in Twitter or Facebook