What Causes a Company's Stock Volume to Go to Zero?

by Chirantan Basu ; Updated July 27, 2017

The volume is the number of shares of a company's stock that trades on a day, week or some other period without adjusting for stock splits. The trading volume depends on the number of orders from individual and institutional investors. When the trading volume of a company's shares falls to zero, it means that the stock exchange is no longer accepting or processing buy or sell orders. This stoppage could be for a few hours, or it could be permanent.

Trading Halt

Stock exchanges impose trading halts on a company's stock, usually when the company has or is about to announce material financial news, such as a buyout offer from a competitor. According to the U.S. Securities and Exchange Commission, an order imbalance between buyers and sellers could also result in a trading halt, which means that the trading volume is zero. When a company is reorganizing its operations under a court-supervised bankruptcy proceeding, the stock exchange usually orders a trading halt. Trading may resume if the company emerges from bankruptcy and keeps its former stock symbol.

Going Private

The volume of a stock could also fall to zero when a company goes private. According to the U.S. Securities and Exchange Commission, a publicly-traded company could de-register its shares if it has less than a certain number of shareholders. A company may offer to buy back all of its outstanding shares if it believes that the share price is too low or if it has made a strategic decision to become a private company. After the company acquires the required number of shares, the shares stop trading and the volume falls to zero. The company could also declare a reverse stock split to reduce the share count below a certain threshold quantity and then de-register the shares.

Restructuring

Restructuring operations could also result in a company's stock volume going to zero. For example, a company could decide to put itself up for sale. If it gets a successful buyout offer and the shareholders agree to tender their shares, the company delists from the stock exchange and the share volume goes to zero. When two companies merge to create a new company, the shares in the legacy companies stop trading.

Considerations

Investors can do little when a company's shares stop trading except to try to analyze the reasons. If the news is negative, such as an impending bankruptcy or the loss of a major customer, the share price may drop sharply once the exchange lifts its trading halt. If the long-term business fundamentals are sound, investors may hold on and hope for the stock to reflect the underlying fundamentals over the long term. For mergers and buyouts, the investors get new shares, which could offer better long-term returns than the old shares.

About the Author

Based in Ottawa, Canada, Chirantan Basu has been writing since 1995. His work has appeared in various publications and he has performed financial editing at a Wall Street firm. Basu holds a Bachelor of Engineering from Memorial University of Newfoundland, a Master of Business Administration from the University of Ottawa and holds the Canadian Investment Manager designation from the Canadian Securities Institute.