Delisting is what happens when a publicly traded company leaves the stock exchange (locally, this is the Philippine Stock Exchange or PSE), by choice or otherwise.
If a company you invested in gets delisted from the PSE, it will let you know that it want to buy back their shares. Known as a tender offer, this is where a company basically says “We are delisting from the stock exchange and we’re offering to buy our stocks back from you at this price. You have until this date to do this.”
Your 3 options
If you receive a tender offer, then there are 3 things you can do:
- Sell the stocks back to the company at the price they offered you.
- Try to sell the stocks on the stock exchange in hopes of getting a better price at the risk of missing the tender offer period.
- Hold on to the stocks after delisting.
While the first 2 are fairly straightforward, the third option can get a bit complicated.
If the company delists and you’re still holding the shares, your stocks go through an upliftment process, where your stockbroker gives you the stocks in certificate format. You stay on a stockholder and get all the benefits associated, like dividends payouts.
If you want to sell your delisted stocks, you can either sell it back to the company back at their stock transfer office or find a direct buyer and negotiate with them. Either way, you will also have to pay capital gains tax on the sale, since it didn’t take place on the PSE.
As an investor, it’s important to always stay abreast of developments in your investments.
Some companies such as blue chips can reasonably be considered “file and forget” since they’re unlikely to delist. However, if you invest in secondliners or penny stocks, you might want to pay a little closer attention in case they decide to delist.
At worst, you could end up with certificates that are worth much less than what you invested. This would be one example of a paper loss that could actually be permanent.
