Are the stocks in your hands facing delisting? An investor's survival guide you must know

Many investors have experienced this fear: holding a stock that suddenly receives an exchange announcement stating that it will undergo delisting review. At this moment, it’s natural to ask—Is a delisted stock still worth anything? How should I handle it? Will I really lose everything?

In fact, as long as you understand the ins and outs of delisting in advance and grasp the correct response methods, investors still have the opportunity to minimize losses even when facing a delisted stock.

Will a delisted stock become worthless? It depends on these four factors

First, let’s clarify a misconception: Delisting ≠ stock invalidation. Whether a delisted stock still has value mainly depends on the reason for delisting:

Scenario 1: Company voluntarily privatizes and delists At this point, your stock might even appreciate. When the company’s publicly tradable shares are only 10%~20%, major shareholders often buy back retail investors’ shares at high prices during specific periods. By continuously monitoring company announcements, you may secure a decent compensation.

Scenario 2: Company is forced to delist due to financial fraud or violations Take Luckin Coffee as an example, which was delisted from NASDAQ in 2020 due to financial fraud. In this case, the investor’s delisted shares are “frozen” and cannot be converted into cash. You must wait until the company completes legal procedures before handling them. During this period, you also lose the right to use these funds.

Scenario 3: Company goes bankrupt and is liquidated This is the worst situation for investors. In bankruptcy liquidation, common shareholders are always last in line. Creditors are prioritized for compensation, and by the time it reaches shareholders, the remaining funds are often negligible. Many investors end up recovering almost nothing.

Scenario 4: Market value is too low or stock price continues to decline Even if the company hasn’t gone bankrupt, if the stock price falls to the exchange’s minimum requirement, it will be delisted. At this point, the stock’s liquidity is extremely poor, making it hard to find buyers. If you’re lucky, you might find a buyer on the exchange or OTC; if unlucky, you may face complete illiquidity.

How to identify delisting risks in advance? Watch out for these warning signs

Stock delisting usually doesn’t happen suddenly; the process can take several months. Investors should pay attention to the following stages to respond promptly:

Step 1: Warning stage — The stock code will be marked with “*” or “ST” (e.g., “*XX Electronics”), which is a warning issued by the exchange.

Step 2: Remediation period — The company has a 3~6 month “remedy window” to improve its financial situation, such as submitting revised financial reports or attracting new investors.

Step 3: Review stage — If improvement targets are not met, the exchange will hold a review meeting for evaluation.

Step 4: Delisting announcement — Once the delisting date is announced, the stock will officially exit the market after the last trading day.

Key reasons for delisting to be cautious of include:

• Consecutive years of losses, negative net worth
• Financial reports with auditor disclaimers or inability to express an opinion
• Violations such as failure to disclose information, insider trading, or false reporting
• Companies delisted due to major risks or violations

Stock suspension ≠ delisting, don’t be scared

Many investors confuse “stock suspension” with “delisting,” but they are entirely different:

Stock suspension is usually short-term; the stock remains listed but temporarily cannot be traded. Common reasons include major event disclosures or corporate restructuring. After the issue is resolved, trading resumes, and the stock’s value remains largely unchanged.

Delisting, on the other hand, is permanent, meaning the stock has completely exited the exchange, and investors can no longer buy or sell it on that platform.

In simple terms: suspension is a temporary halt, delisting is a complete exit. Long-term investors generally don’t need to worry excessively about normal suspension events, as long as the purchase price was reasonable and patience is maintained during suspension. But once a delisting announcement is made, active measures are necessary.

Prevention is better than cure: How to avoid the risk of delisted stocks

The best way to prevent losses is to do your homework before buying stocks:

Step 1: Deeply analyze the company’s fundamentals
Before purchasing, check the company’s business prospects, industry position, financial health, whether it meets exchange listing requirements, and potential risks. Pay special attention to companies with consecutive losses or declining financial report quality.

Step 2: Diversify investments to avoid concentration
Don’t overly concentrate your funds in a single stock or asset class. Proper asset allocation can significantly reduce extreme risks.

Based on different risk preferences, consider the following allocations:

• Aggressive investors — CFDs 15%, stocks 50%, funds 30%, bank deposits 5%
• Balanced investors — CFDs 10%, stocks 35%, funds 35%, bank deposits 20%
• Conservative investors — CFDs 5%, stocks 15%, funds 40%, bank deposits 40%

This way, even if one stock faces delisting, your overall portfolio won’t collapse.

If a stock is truly delisted, these 5 steps help minimize your losses

If unfortunately your stock is notified for delisting, don’t panic—take the following steps to maximize your benefits:

Step 1: Immediately check company announcements
The company will provide detailed information on the “Market Observation Post System” about the delisting date, subsequent handling methods, buyback plans, or transfer to OTC trading. Actively track announcements or contact your broker for details.

Step 2: Evaluate buyback options
If the company offers a buyback plan, you can choose whether to participate. If you accept, complete the procedures within the announcement deadline; overdue, you lose the buyback right. If you decline, you can continue holding but should prepare for potential significant liquidity reduction.

Step 3: Watch for OTC transfer opportunities
Some delisted stocks may transfer to OTC markets. Although OTC trading volume is much lower than the main board, you can still buy or sell through your broker. If the company’s financial situation improves later and it re-lists, holding the stock and waiting for recovery might be wise.

Step 4: Deal with bankruptcy liquidation
If the delisting is due to worsening finances or bankruptcy, you need to wait for the liquidation process to complete. The company will distribute remaining assets according to law, but common shareholders are last in line (after creditors), and the final amount recovered is often limited. While the stock value may approach zero, it can serve as evidence for “investment loss deduction” during tax filing.

Step 5: Handling situations with no buyback or OTC transfer
If the company neither offers buyback nor transfers to OTC, investors can still:

• Continue holding the stock and monitor company developments
• Arrange private transfers with other shareholders (must complete company transfer procedures)
• Consult with brokers or company shareholder services to understand transfer and registration procedures

Tax treatment of delisted stocks: don’t overlook this detail

Many investors are unaware that delisted stocks can still be used for tax purposes:

If the stock is delisted and confirmed to be non-tradable, investors can declare it as a capital loss to offset capital gains, reducing tax liability. This way, at least some losses can be recovered tax-wise.

If the company later conducts a cash buyback, the gain or loss is calculated based on the actual amount received.

It is recommended to consult an accountant or tax advisor during tax filing to ensure proper declaration and not miss out on this tax benefit.

Key takeaway: Risks of delisted stocks are manageable

In summary, delisted stocks are not necessarily catastrophic. The key points are:

Prevention — do your homework at the purchase stage, diversify your portfolio
Timely response — upon receiving delisting warnings, pay attention to announcements and evaluate options
Flexible handling — choose the most appropriate response based on the reason for delisting
Seize opportunities — even if delisted, there may still be ways such as buybacks, OTC transfers, or private sales to recover some losses

Finally, remember: if you assess that the probability of loss from a delisted stock is high, it’s better to sell quickly if someone is willing to take it over. Conversely, if the potential profit is significant, holding and waiting for news of high-price buyback might be worthwhile. Sometimes, delisted stocks are relisted later, allowing your holdings to re-enter trading, so everything remains possible.