Delisting, whether of stocks or cryptos, is usually an ominous sign, as it could render the shares or coins worthless. Nevertheless, there are usually indications and factors that precede such delisting.
What is Delisting?
Delisting is a term used to describe the removal of a stock or a cryptocurrency from a trading platform or exchange. This action is typically taken by the exchange or platform operator, and it can have significant implications for the value and tradability of the affected securities.
In the case of stocks, delisting often occurs when a company fails to meet the listing requirements of the exchange on which it is traded. These requirements can include financial performance metrics, such as revenue, profitability, and market capitalization. Failure to meet these requirements can result in the exchange delisting the company's shares.
In addition to failing to meet listing requirements, a company's shares can also be delisted due to other factors, such as fraud, legal issues, or bankruptcy. For example, if a company is found to have engaged in accounting fraud or other illegal activities, the exchange may choose to delist its shares to protect investors.
Similarly, in the case of cryptocurrencies, delisting can occur for a variety of reasons. Cryptocurrencies may be delisted if they fail to meet the platform's listing requirements or if they are found to be involved in illegal activities, such as money laundering or terrorist financing. Additionally, some exchanges may delist cryptocurrencies if they are deemed to be too risky or volatile.
Regardless of the reason for delisting, the impact on the affected securities can be significant. When a stock or a cryptocurrency is delisted, it can become more difficult to trade, and its value may decline sharply. This is because the delisting signals a loss of confidence in the security by the exchange and its investors.
However, it is worth noting that delisting is not always the end of the road for a stock or a cryptocurrency. In some cases, a company or a cryptocurrency may be able to regain compliance with the listing requirements or address the issues that led to the delisting. Once this happens, the security may be relisted on the exchange, and its value may recover.
Delisting Process and Its Implications for Investors
When a company is delisted from an exchange, it can have serious consequences for investors. However, delisting doesn't always result in a complete loss of money. In some cases, investors may receive cash through buybacks or liquidation processes. Additionally, exchanges typically have preset resale values for assets, which can provide a level of protection for investors.
The delisting process begins with the exchange issuing a warning notice to the company. If the company fails to resolve compliance issues by the deadline, it will be delisted. Once delisted, the company trades over the counter (OTC) through a dealer network. While investors may not lose their money immediately, many may begin to abandon these assets, which can lead to a collapse in their market value. Overall, it is important for investors to understand the delisting process and its implications for their investments.
Should You Hold Onto Delisted Digital Assets?
After an asset is delisted, it typically experiences a sharp decline in value due to massive selling and minimal buying. As a result, major investors and crypto whales may lose interest in these assets and withdraw their funds, causing other investors' hard-earned money to lose value rapidly. To avoid this steep decline, investors may opt to sell their holdings or wait for re-enlistment.
However, if the company offers a buyback, investors have the opportunity to set their resale prices. This price must be higher than the preset floor price, and the company will announce a final delisting price after investors vote. This final price must enable the acquirer to purchase at least all of the public's shares. Investors must decide whether to sell during a buyback, as re-enlistment is also possible.
Reasons for Delisting Cryptocurrencies from Exchanges
Cryptocurrency exchanges delist coins for various reasons. Maintenance costs are one reason as coins listed on an exchange require upkeep from the exchange's programmers. Technical issues and bugs can arise in new cryptocurrency software, demanding developers' time. If the upkeep is too difficult and time-consuming while the trading volume is small, the exchange may deem the coin not worth maintaining.
Some exchanges prioritize immediate trading fees and use periodic delistings to encourage trading activity in a coin. Other exchanges see wash trading as unsustainable and unhealthy and may delist a coin even if generating large volumes and trading fees due to wash trading.
Government regulators may also force delistings of coins considered unlicensed securities or financial products. Some exchanges charge fees for listing a coin, while others seek payment for not delisting a coin. Coins may also be delisted due to negative associations, unresponsive teams, dead projects, and security vulnerabilities.
The project was abandoned by the developers, which led to its delisting from exchanges.
In the context of cryptocurrencies, digital exchanges are responsible for offering a platform where users can trade one cryptocurrency for another or purchase and...