A stock that’s delisted cannot be traded on that particular exchange. However, the company itself is still around and its stock still can be bought and sold.
The problem is that without belonging to a stock exchange, the stock is much harder to trade which makes it more illiquid. Stock markets don’t simply trade stocks, but build a market for the stock. Depending upon an exchange, certain brokers become market makers for that particular stock, and other brokers will go to that particular broker to buy or sell the stock.
In the U.S., the Pink Sheets referred to in an earlier post is a way for non-listed stock to be traded. The company was called the National Quotation Bureau, but they printed their quotes on pink sheets in order for traders to know these were non-listed stocks. Later on, the company actually took on the name “Pink Sheets”.
Even in the Pink Sheet trading, there are multiple levels. There are premium stocks that fully disclose their finances but may either be too small for a stock exchange, or simply don’t meet full SEC compliance. Most delisted companies go to this level – at least at first.
Then there is the next level where stocks are rated on how much disclosure that they give. The categories are Current, Limited, and No Information.
You can obviously see why a company will do almost anything to avoid delisting. Delisting makes it harder to trade your shares, and you get associated with fly-by-night companies who are traded in the Pink Sheets. Companies can do several tricks to prevent delisting including reverse splitting of their shares if they are trading below the limit of the exchange. In NASDAQ, the limit is $1.00.
Before the current recession, a company would have 30 days to get its stock price above a $1.00 before being delisted, and it was pretty automatic. However, due to the recession, NASDAQ has lightened up a bit on the policy. Companies that trade below $1.00 per share are put on a watch list. If it appears that the company is continuing to have financial issues, the company is then giving an official delisting notice and it has the 30 day period to move its stock price above $1.00 per share. Failing that, the company is delisted.
I believe the Toronto exchange works in a similar way. You must maintain a particular stock price in order to be listed. They also have another board called the NEX that is for companies that get delisted or otherwise don’t qualify for the TSX. I am not 100% sure if companies on the NEX are considered delisted, or just not as active.