What it means
When a company's shares are listed on an exchange, they are also registered under Section 12(b) of the Securities Exchange Act of 1934. To end the listing, either the exchange or the company itself files Form 25.
The form names the issuer, the class of securities and the rule that allows removal. Timing is set by the rules.
A delisting generally becomes effective ten days after the form is filed, and the deregistration of the class under Section 12(b) follows later, typically ninety days after filing. During the gap the company still has obligations, so finance teams must plan carefully.
Companies file Form 25 for many reasons. A business may be acquired and cease to exist as a listed entity, may choose to move to a different exchange, or may decide that the costs of a listing outweigh the benefits.
Sometimes an exchange files the form itself because the company no longer meets the listing standards, such as a minimum share price or minimum market value. Delisting changes how investors can trade.
Shares may continue to change hands on over-the-counter markets, but trading is usually thinner, spreads (the gap between buying and selling prices) are wider, and many institutional investors cannot hold unlisted stock. That is why a Form 25 often hits the share price.
The form is only one piece of the puzzle. A company that delists may still have to file reports if it has other registered securities or meets other tests, and it may need to file Form 15 to end its duty to report.
Advisers therefore treat Form 25 and Form 15 as a pair when a company plans to go dark. Investors should watch for it.
A Form 25 appearing on EDGAR, the SEC's public filing system, is an early signal that a merger has closed or that a company is leaving the public markets. Reading the dates in the filing helps investors work out when trading will actually stop.
In practice
Real-world examples.
Example
A chemicals company is acquired for cash. On the closing date, the exchange files Form 25 to remove the target's shares from listing, and the shares stop trading shortly afterwards. Holders receive the merger price directly, so no further action on the exchange is needed.
Example
A small technology firm struggles to meet an exchange's minimum price rule for months. The exchange files a Form 25 after the company fails to regain compliance, and the shares move to an over-the-counter market. Existing holders find that fewer brokers are willing to quote the shares.
Example
A family-controlled retailer decides that exchange fees and reporting costs are too high. It announces a voluntary delisting, files Form 25 and later files Form 15 to end its duty to report. The owners say they will now report results privately to lenders.
Case study
Seen in the real world.
Harbourline Foods is a fictional packaged-food company used as an illustrative example. Its board concludes that the annual cost of a listing is higher than the benefit, since trading volume is low and few analysts follow the shares.
The board gives notice to the exchange and announces the plan to shareholders, then files Form 25 to delist the shares. A few weeks later the company files Form 15 to suspend its reporting duties, once it has confirmed that it meets the conditions.
Shareholders who wish to sell must now use an over-the-counter market with fewer buyers. The company saves on compliance costs but loses easy access to public equity funding, which it must weigh in future decisions. The finance director adds a note to the board pack that rebuilding a public profile later would be slow and expensive, so the decision should be treated as close to permanent.
Watch out
Common mistakes.
- Assuming a delisted company has stopped reporting. Delisting from an exchange and ending reporting duties are separate steps.
- Thinking shares become worthless after delisting. The shares still have value, but they are harder to trade and may sell at a discount.
- Ignoring the waiting periods. The delisting and the end of registration take effect at different times, so obligations can continue for a while.
Questions
People also ask.
Who can file Form 25?
Either the exchange or the issuer, depending on the reason for removal and the rule being used. The choice affects which rule is cited on the form and who signs it.
Does a Form 25 always mean bad news?
No, because a delisting can follow a successful merger, a move to another exchange or a planned take-private deal.
Where do investors find it?
On EDGAR, the SEC's public database, and often in a company press release or exchange notice. Setting up an EDGAR alert for a company name is the easiest way to catch one.
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