With the spotlight on high-profile initial purchase offerings (IPO) in recent months, investors may get the impression that once a company has been listed on a stock exchange, the only way is up. However, this is not always the case, and when stocks no longer meet the minimum requirement for being listed, they can be delisted, usually with far less fanfare than the initial listing.

Getting listed on a stock exchange is an expensive, and often lengthy, endeavor. For example, a US company looking to list on the NYSE first needs to request a confidential review to ascertain whether it is eligible. Reviews and application fees can run into tens of thousands of dollars, so it is in the company management's best interest to assess their eligibility before even approaching an exchange.

Domestic listing requirements stipulate a minimum distribution within United States of the company’s shares, which can be done through public offerings or similar means. Shares need to maintain a minimum value set by the exchange, with warnings being issued should they drop below that, and a period of time stipulated to bring the share value back to acceptable levels. The list of prerequisites is extensive and varies a little from one exchange to the next, but minimum requirements are generally high to ensure that only quality companies trade publicly. This is in the best interests of the exchange, which has a reputation to build and maintain, and in the best interests of investors who rely on exchanges to thoroughly investigate companies before allowing them to trade publicly. In addition to application and listing fees, companies that wish to trade publicly can expect to pay an annual fee and undergo ongoing scrutiny to ensure they are meeting minimum standards.

Delisting of a company will not take place without fair warning and generally the delisting process will start when a company has been trading below the minimum stock price and market value requirements for thirty consecutive days. The company will be sent a deficiency notice and given a period of time to rectify the situation. With the unprecedented turmoil in markets over recent years, this time period has at times been negotiated and extended beyond what it would normally be.

Delisting from an exchange does not necessarily mean bankruptcy for the company, although its creditors may call in loans and it credit rating is likely to be downgraded. They also may lose the trust of their investors and the element of respectability that comes with being listed on a large exchange. However, there is still the option of trading through FINRA's Over the Counter Bulletin Board (OTCBB), or through Pink Sheets, both of which are considered to be risky as they have very little regulation.