The New York Stock Exchange has a strict policy spelling out under what conditions companies may maintain their listing on the exchange. A delisted stock faces the threat of negative press, a new set of investors and a more difficult market for trading.
The primary reason the NYSE delists stocks is for failing to maintain a share price above $1. Other reasons may include a small number of shareholders or publicly held shares, scant trading volume, an inability to pass financial tests for asset or equity minimums, and a lack of financial reporting.
It takes at least six months for a stock to be delisted from the NYSE. When the exchange contacts a company regarding potential delistment, the company may file a plan within 45 days, demonstrating how it plans to regain a solid footing. If the exchange rejects the appeal, the delisting process begins.
Delisted stocks usually go to an over-the-counter market, such as the OTC Bulletin Board or the Pink Sheets. These are networks where broker-dealers buy and sell often high-risk stocks.
When the NYSE delists a stock, the ticker symbol takes on a suffix such as ".PK," ".OTCBB" or ".OB." A ".PK" suffix means the stock has moved to the Pink Sheets, while ".OTCBB" and ".OB" let investors know that the stock now trades on the OTC Bulletin Board.
Because stocks on the OTC markets no longer have to comply with major exchange rules such as systematic financial reporting, conservative investors tend to shy away while aggressive investors move in. OTC shares can be more volatile as a result.
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