Buzz
Every year, stocks are temporarily suspended and removed from different exchanges. Although this isn't an everyday occurrence, it's certainly not a situation any investor would want to face. The key concern is: What happens to your investment?
The SEC has the authority to halt trading when it deems it necessary for public safety. This includes the following scenarios:
Failure to provide timely, accurate, or sufficient information about the company, such as when a company falls behind in submitting required reports;
Doubts regarding the veracity of publicly available data, including press releases and reports, about the company’s operational status, financial health, or business dealings;
Concerns about stock trading, including insider trading, potential market manipulation, and the ability to clear and settle transactions involving the stock.
While it’s possible for the stock to resume trading once the suspension is lifted, there are times when it’s delisted altogether from the exchange, and that’s bad news for your portfolio.
Why? We’re not talking about a company going private, which could be a positive form of delisting. In this scenario, it’s likely an indication that something’s seriously wrong with the company you’ve invested in. While you don’t immediately lose your money—you’re still a shareholder—it’s possible the shares will become almost worthless.
“Although the intrinsic value of the stock hasn’t changed since the day before it was delisted, the mere fact that it was removed from its exchange is enough for market forces to push its price even lower,” states The Street. “That stock you once purchased with your hard-earned money is probably worth very little now.”
That doesn’t mean you should rush to sell and take a loss. If the company pulls itself together, the stock might get relisted. However, if the company files for bankruptcy, you’re likely out of luck.
If you're considering investing in a stock, but the company has previously faced suspension, the SEC suggests following these steps:
Investigate the Company
: Always perform due diligence before purchasing shares, particularly if the company has had a trading suspension. Assess its financial health, organizational structure, and future outlook.
Check the Company’s SEC Filings
: This data is publicly available and can be accessed through the Commission’s
EDGAR filing system
.
Be Cautious:
Investors should always question the motives behind any “hot” stock tip. It’s important to conduct independent research and be mindful that information from online blogs, social media platforms, and even a company’s website might be unreliable or even deliberately deceptive.
You can find recent trading suspensions here.
