Capital loss selling Voluntary Delisting
In the case of voluntary delisting, listed companies voluntarily opt for permanent removal of securities from the stock exchange where the company decides to go private.
Mainly, mergers with another company or amalgamation or non-performance are a few reasons for voluntarily delisting shares. If you own a stock of the company that has opted for voluntary delisting, the company is required to give you two options as per the delisting guidelines laid out by the Securities and Exchange Board of India. Following are the options –
1. Offload Your Shares in Reverse Book Building
Promoter or acquirer will buy back the shares through a reverse book building process. Promoters are required to make a public announcement of buyback by sending out a letter of offer to eligible shareholders and a bidding form.
In this case, eligible shareholders like you can seek this opportunity to exit by tendering your shares through respective stockbrokers under the delisting offer.
The final price is decided based on the price at which the maximum number of shares has been offered.
The promoter will have a choice either to consider or not to consider the price. If the promoter accepts the price, all valid offers up to the final price are accepted.
When the shares tendered by the public shareholders reach the limits specified in the regulations, delisting is considered successful. The company shall remain listed in case the limit specified is not met.
The remaining investors will have the option to sell their stocks to promoters. Promoters are obliged to accept the shares at the same final price. The investors are allowed to do this for up to one year from the date of delisting.
2. Hold Till You Find a Buyer
If you have not sold back your shares in the reverse book building process or during the exit window period, you can still hold them till you find the buyer on the over-the-counter market.
The delisted share can be hard to sell, as there will be a decline in liquidity without any over-the-exchange transactions. However, when you wish to sell in the over-the-counter market, all you need is patience. It can take a long time to find the buyer who is willing to buy at the desired price.
When a company voluntarily opts for delisting with some expansion reasons, the company usually offers its investor a buyback at a premium price, which can result in a significant gain.
However, it’s important to note that it’s just a temporary opportunity for investors to gain. Once the buyback window closes, the price of the stock is likely to drop.
Read more on Groww: https://groww.in/blog/what-happens-when-a-stock-is-delisted/