Delisting

Understanding Delisting

Delisting is the process of removing a project from an exchange’s listing standards. There are various reasons why a project may be delisted, including:

• Lack of regular trading activity
• Absence of protocol development
• Faulty network or smart contract reliability
• Non-existent business-to-customer interaction
• Proof of fraudulent or dangerous activity

Once a project is delisted, its asset can no longer be bought or sold on the exchange. Delisting is usually permanent, although there may be exceptional circumstances where a project’s asset is relisted.

A business may voluntarily delist if it is purchased or becomes private. Conversely, if a firm fails to meet the listing standards set by exchanges where its assets are traded, it is involuntarily delisted.

The listing prerequisites can be complex, with different regulations for various issuers and securities. These prerequisites may include prompt filing of financial statements, a share price above a certain threshold, a reasonable level of shareholders, a minimum market capitalization, or specific revenue, profit, cash flow, and trading activity requirements.

Delisting can have significant implications as it makes it harder for investors to explore and purchase company shares that are not listed on popular exchanges. This means that the firm will be unable to offer new shares to the market to fund its new business ventures.

Impending bankruptcy, failure to complete obligatory reports, or share values falling below the exchange’s minimum threshold are all potential reasons for delisting a stock. However, a business can request to have its shares relisted once it resolves the issue and meets the listing criteria. The success of relisting a firm during its second term on the market may be limited and met with conflicting feelings from investors.

It is important to note that not all businesses are delisted for negative reasons. Delisting helps protect markets from substandard securities and issuers nearing the end of their life cycle. Exchanges play a crucial role in decreasing systemic risk and safeguarding investors by enforcing rigorous administrative requirements for all issuers.

In the world of crypto, delisting a token/coin results in the removal of all its trading pairs from the cryptocurrency exchange. However, investors who have already invested in the delisted project are given a specific time frame to withdraw their funds before the crypto project becomes unavailable on the exchange.

A recent example of delisting occurred on July 7, 2021, when the world’s largest cryptocurrency exchange, Binance, delisted the OST, RCN, and WPR projects after conducting a thorough review. Binance delists projects that violate one or more rules, including lack of commitment to the project, low trading volume, weak network security, evidence of fraudulent activity, and other parameters considered by the Binance team when making delisting decisions.

In conclusion, businesses must adhere to the rules set by trading platforms to avoid getting delisted.