For publicly traded companies it can be a status symbol to have their equity shares listed on a major stock exchange, such as the New York Stock Exchange Euronext or Nasdaq. Listed companies have met a variety of criteria, including financial criteria, established by an exchange, but there is no guarantee the exchange will continue to serve as a stock's trading platform. A stock can become delisted from a major exchange for failing to maintain exchange standards; that does not mean the company is delisted from the entire stock market. Shares may continue to trade in the over-the-counter bulletin board (OTC:BB) market where there are no listing standards.
If a company's stock falls below $1 per share for longer than 30 days, that stock is in danger of losing its listing on the NYSE Euronext or Nasdaq exchange. Fortunately for companies, once a stock falls into the danger price zone, there is still time for the stock price to recover. A letter of notification is sent to company officials, who have another six months for the stock to strengthen to above $1 before shares are delisted from either major U.S. exchange.
Companies that file for bankruptcy protection are at risk of being delisted from an exchange, but the rules surrounding insolvencies are more subjective. NYSE Euronext officials, for instance, exercise their judgement to determine whether to remove the listing for a company seeking bankruptcy protection. In the case of photography company Kodak, which began its listing on the NYSE Euronext in the early 20th century, a 2012 bankruptcy filing prompted exchange officials to remove the stock's listing from the "big board," as the NYSE is called, and shares of Kodak began trading in the OTC:BB market as a result.
A company's management that runs afoul of stock exchange parameters can sometimes decide to opt out of its listing. In 2013 financial firm Ohio Legacy Corp. revealed that shares would begin trading in the OTC:BB market -- where there is less regulation and less price transparency -- instead of the Nasdaq, where shares were previously listed. The company had received a "deficiency notice," which warned that shares were in danger of being delisted because the stock price dropped below $1 per share. The stock price still had 180 days to recover, but company officials decided that maintaining a Nasdaq listing was too expensive and that an OTC:BB listing would not compromise trading volume in the stock.
Exceptional circumstances sometimes result in lowered expectations on the part of stock exchange authorities. When the economy was in recession in 2008 and 2009, the stock market was in turmoil as stocks lost much of their value. Shares of financial services firm Citigroup, which in addition to trading on the NYSE Euronext was also a component in the Dow Jones Industrial Average, were hovering at around $1 per share as a result of the crisis. For all intents and purposes, the stock should have been at risk of being delisted from the exchange. Nonetheless, as a result of the financial crisis, the NYSE Euronext temporarily suspended its delisting procedures and Citigroup remained a listed stock, although it was removed as a Dow component.
- Market Watch: Citi Shares Dip Below $1 -- Economy Key to Any Recovery
- Bloomberg: GM, Citigroup Replaced in Dow by Cisco, Travelers
- NewJersey.com: Kodak Files for Bankruptcy, Stock Delisted
- Nasdaq OMX: Continued Listing on The NASDAQ Stock Market
- Crain's Cleveland Business: Ohio Legacy Corp. to Delist its Shares from Nasdaq
Geri Terzo is a business writer with more than 15 years of experience on Wall Street. Throughout her career, she has contributed to the two major cable business networks in segment production and chief-booking capacities and has reported for several major trade publications including "IDD Magazine," "Infrastructure Investor" and MandateWire of the "Financial Times." She works as a journalist who has contributed to The Motley Fool and InvestorPlace. Terzo is a graduate of Campbell University, where she earned a Bachelor of Arts in mass communication.