It would be alarming to open your Robinhood account to find one of your stocks missing from your portfolio. But there’s no need to panic. There are practical reasons why this may happen. So, what happens when a Robinhood stock gets delisted? Let's dive in.
Stocks often disappear as a result of corporate actions such as stock splits or company mergers. This type of corporate action may also result in a stock appearing in your Robinhood account.
The most common reason Robinhood stocks disappear is reverse stock splits. When a company executes a reverse split, the number of its shares decreases but the value of each share increases. Companies sometimes split their stock to boost its price and avoid getting delisted.
Keep in mind that a reverse stock split can signal a company facing some kind of financial failure since it raises the value of otherwise low-priced shares.
Ok, so what is delisting? How does it happen? And what are your options if it happens to a stock you own? Let's answer those questions and more in this article.
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Delisting happens as a result of a company ending operations, declaring bankruptcy, merging with another company, or not meeting listing requirements. In some instances, a stock can be delisted if a company goes private. Delisting is not a decision made by Robinhood or another brokerage.
Listing requirements vary slightly by exchange. With most exchanges, the requirements include market capitalization and liquidity. A firm must also be current on their listing fee. If these requirements are not met, a stock could be delisted.
Once a stock delists for one of the reasons mentioned above, the Robinhood in-app market data will no longer reflect the current trading price. You will need to find stock quotes somewhere else for an idea of what price your sell order will execute at if you choose to close the position.
One of your Robinhood stocks can delist from the NYSE or Nasdaq for several reasons. A stock may be delisted if the company that issued the stock has been bought and gone private, or if it has fallen short of an exchange's listing requirements. Stocks delisted from the NYSE and Nasdaq disappear from Robinhood.
When a stock is delisted from the NYSE or Nasdaq, it will move to Over The Counter (OTC) markets, often under a slightly different ticker symbol.
OTC markets are those where investors trade directly with buyers without the use of a central exchange or any other third party. This means the exchange industry rules and regulations are not in place to protect investors.
OTC markets do not have physical locations or market-makers, and in general are less transparent than stocks operating within the industry requirements.
Robinhood doesn’t currently support OTC trading. Therefore, if your stock is delisted from the NYSE or Nasdaq, Robinhood will only let you sell the stock, but not buy additional shares.
Bear in mind that the prices of delisted stocks can drop significantly. You can only sell a delisted Robinhood stock at its current price on the OTC market, and there may be no one interested in buying it. OTC markets often suffer from limited liquidity, as many investors shy away from buying them.
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