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If a stock gets de-listed from the NYSE, then I would guess that it is done secretly because if prior notice was given, then obviously there would be panic selling. Also, anyone who knew about the de-listing ahead of time would be in a position to make a lot of money by buying puts or selling calls on the stock, or by shorting it.
So, what is the exact process for de-listing? For example, let's imagine I have a stock that gets delisted, what will happen? Will I get notified?
Also, anyone who knew about the de-listing ahead of time would be in a position to make a lot of money
The fact is, we all know about the delisting well ahead of the time that it actually takes place.
The primary factor in the decision of, at least the New York Stock Exchange (NYSE) to delist is that a security's price closed below $1.00 for 30 consecutive trading days.
Why would a stock’s price drop to below $1.00 and stay there consistently? It is because investors, the public, no longer have confidence in the long-term prospects of the company. The panic selling has already taken place.
In the USA, all publicly traded corporations must file audited financial statements with the Securities and Exchange Commission (SEC). Well before delisting, we have all seen the declining sales, the mounting losses, the write-offs and the increasing debt. We’ve seen the quarterly earnings reports miss the analysts estimates. We’ve seen the stock price declining steadily even as the overall market increases. We’ve sold our stock at bargain basement prices.
When we look at the prices of options, we soon discover that the risk of the stock going to zero is already priced in. Moreover, the options are very thinly traded, meaning that almost no-one wants to bet with you whether the price will get to 75¢ or 50¢.
When the delisting is announced, it not a surprise to anyone. It is a nail in the coffin.
Listing and delisting requirements vary from exchange to exchange. A company can become non compliant for a variety of reasons (market cap, share price for 30 days, number of shareholders, montly volume, etc.). If a company fails to meet one of these criteria then the delisting process begins. The exchange sends a notice to the company and the company has a response period to formulate a plan which may or may not be accepted by the exchange. The symbol of a non compliant company is adjusted.
None of this a major surprise or secret cabal. More often than not, it's sort of a ho hum event. As @dsolimano said, generally the panic selling happens before the delisting, and the delisting is the icing on the cake. Since the delisting information is public and takes a period of time to achieve, there's no special opportunity to make a lot of money by buying puts or selling calls on the stock, or by shorting it. For example, if share price is below $1 for 30 consecutive trading days (NYSE) and the delisting process is begun, will paying a premium for long puts make much sense? In addition, the option exchanges tend to delist option trading on $1 - $2 -$3 stocks long before the stock is delisted.
You may make money on a short position because it's going to zero but I wouldn't touch that short position with a ten foot pole. Any good news such as reorganization or takeover could rally the stock quickly to $2 or $3 or more, clobbering you.
There are certain requirements that must be met to remain on the NYSE (for example the stock must remain above a certain price). If the stock doesn't meet these requirements, it is delisted. However, it is still tradable if the company attempts to go to the OTC (over the counter market). The OTC is less regulated (regulated by Finra not the OTC), and simply has lower trading standards. This can sometimes be good for developing stocks (because it costs money to stay listed on the OTC, money that some developing firms may not have). The OTC is cheaper, and as financial conditions improve they can get re-listed.
However, Most people know about a delisting in advance because the NYSE publicly shows the warning information. They give the company a specified amount of time to meet the NYSE standards. They can give companies in some cases an extension if a plan is submitted to the NYSE that shows the company can reach compliance if given an extension. Some stocks can last a while on the NYSE after getting a compliance warning due to this.
