Sunday, December 27, 2020 10:37:59 PM
There are generally three ways to Go Dark.[57] The first way to Go Dark involves a delisting from a major exchange without deregistration. In other words, the company does not “opt-out” of the SEC reporting obligations but continues trading on the OTC Bulletin Board.
The second way to Go Dark is for the firm to deregister from publicly reporting and then to follow it up with some sort of repurchase, tender-offer, exchange, or going private transaction. Economists have found that this type of deregistration is often correlated with positive outcomes for shareholders.[58] (HYPUR???)
The third way to Go Dark involves a delisting from a major exchange with deregistration, causing the company to be traded on the Pink Sheets. This type of Going Dark carries the most burdensome costs. Economists have found that when stock moves from a national exchange, such as the NYSE or NASDAQ to Pink Sheets through an involuntary delisting, share prices fall by half or more, percentage spread triples, and stock price volatility doubles.[59] The Macey and O’Hara study have found that in this type of Going Dark scenario, the consequences produce strikingly similar loss to investors as an involuntary delisting by the exchange.[60] Commentators have noted that investors often cannot distinguish between companies who were forced to delist and those who voluntarily delisted.[61]
To assist in reducing liability for the decrease in stock value and the decrease in liquidity, the company’s board should take the following steps: 1) avoid purchases of shares by the company or affiliates after delisting; 2) continue to list shares on Pink Sheets OTC; 3) keep a good record of all actions taking during the decision-making process; 4) evaluate any conflicts of interest as discussed herein; and 5) if there are any such conflicts, the Board should appoint a special committee with independent legal and financial advisors.[62]
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