Delisting is removing a quoted security from an exchange. Delisting can either be voluntary or involuntary.
Involuntary delisting usually occurs when a company fails to meet the compliance or listing requirements of the exchange. Listing requirements for an exchange usually involve operating in a specific sector and achieving a specific market cap threshold.
What are the reasons for delisting shares?
Delisting occurs when a company ceases to operate, merges, does not meet listing requirements, decides to become private, or becomes insolvent.
Companies must meet listing standards before getting they can join an exchange. The New York Stock Exchange (NYSE), for example, has a strict set of rules and regulations for listings: including maintaining a minimum share price, sales levels, and financial ratios.
If a company fails to meet these criteria, the exchange will issue a warning of non-compliance and it may be delisted. An involuntary delisting is indicative of poor financial health or poor corporate governance.