What Delisting Meant to TAUG on JULY 31,2015.
Over the Counter Bulletin Board (OTCBB) - This is an electronic trading service offered by the Financial Industry Regulatory Authority (FINRA, formerly the NASD). Companies will trade here if they are current in their financial statements.
Pink Sheets - Considered even riskier than the OTCBB, the pink sheets are a quotation service. They do not require that companies register with the Securities and Exchange Commission (SEC) or remain current in their periodic filings. The stocks on the pink sheets are very speculative.
Delisting doesn't necessarily mean that a company is going to go bankrupt. Just as there are plenty of private companies that survive without the stock market or being listed. It is possible for a company to be delisted and still be profitable. However, delisting can make it more difficult for a company to raise money. For example, delisting may trigger a company's creditors to call in loans, or its credit rating might be further downgraded, increasing its interest expenses and potentially even pushing it into the red.
How Does It Affect You?
If a firm is unable to meet the listing requirements of the OTCBB upon which it is traded and resumes trading in the PINK SHEETS is quite obviously not in a great position. Each case of delisting needs to be looked at on an individual basis.
Even if a company continues to operate successfully after being delisted. People lose their faith in the stock. When a company's stock is demoted to the pink sheets, it loses its reputation.
Another problem for delisted stocks is that many institutional investors are restricted from researching and buying them. Investors who already own a stock prior to the delisting may be forced to sell their investment further depressing the company's share price by increasing the selling supply. This lack of coverage and buying pressure means the stock has an even steeper climb ahead to make it back on the OTCBB.
The Bottom Line
Some argue that delisting is too harsh because it punishes stocks that could still recover. However, allowing such companies to stay listed on the PINK SHEETS would result in the simply diluting the caliber of the companies that trade on them and degrading the respectability of the companies that maintain the listing requirements. Therefore, if a company that you own is delisted, it may not spell inevitable doom, but it is certainly a black mark on that company's reputation and, if your company can recover this would be a great a sign for your investments returns down the road.
THIS IS WHY TAUG WILL WIN A LARGE SETTLEMENT IN BOTH LAWSUITS.
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