Once you break it apart, then, the delisting process is somewhat defanged. Still, few would argue that delisting is a good thing. Most institutional operations are not allowed to own delisted shares. News of a potential delisting, alone, can send shares plummeting. The fear of going from a liquid market to a much more illiquid market presents a risk that many can't stomach. Debt covenants requiring companies to stay listed on a major exchange can be triggered. Then, too, there's the actual underlying fundamentals driving the bid price lower to begin with.
Professor Tim Shumway at the University of Michigan's Ross School of Business says a study he published in the late 1990s showed that companies lose between 30% to 40% of their value when they move from a listing to the pink sheets. While that showing also included bankruptcies, there's a seeming takeaway message for investors.
"On average, you should probably sell before delisting," Shumway says.
Still, back on Sept. 21st, Shukla -- a finance professor himself at Syracuse's Whitman School of Management -- stayed on the sideline and didn't sell a share of DayStar. While more shares of the stock traded on that day than any other this year, and prices flowed from one extreme to the next, Shukla didn't panic. In fact, he still owns every share today and has no plans to sell.You see, Shukla also teaches courses on investing -- and watching the share price over the past months, he knew the announcement was coming at some point. But he comes at the question of what to do in light of delisting and its impact on his own shares from a different place. "I'm a believer in solar energy. "I'll either go down with them, or rise with them," chuckled Shulka, who also owns solar panels on his own home. To be clear, Shulka isn't recommending that all investors in stocks on the delisting chopping block follow this course. In fact, talk to most experts like Shulka and they'll raise caution regarding the myriad potholes that face a delisted stock. "The impact to the investor is that there will be less trading volume on the stock, since it's not being traded on the big board, and therefore, they are unlikely to get as good a price on the stock," Shulka says. "Essentially, when a stock is delisted, it's going from bad shape to an even more depressed state."