The suspension of listing is a precautionary measure, carried out by the stock market regulator, which aims to protect investors when a security is affected by circumstances unrelated to normal market operations.
Therefore, we are facing a decision that allows operations to be paralyzed when something extraordinary happens. The reason is that, in this situation, the price may vary not due to a market reason (related to supply and demand) but to other factors.
Normally, what the regulator is looking for is to avoid a stock market crisis that could end up affecting the entire market. There are many examples of suspensions, we will see some of the best known at the end.
Requirements for the suspension of the listing
In the first place, the stock market regulator is in charge of carrying it out. Although exceptionally, it can be requested by the governing company of the stock market. In this second case, it must be something extraordinary and of short duration until the situation is clarified or the regulator intervenes.
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In addition to the extraordinary reasons, there are two related to the listed company, which allow this action to be taken. The lack of information or that it is misleading and when there is a Public Offer for Sale (OPV) or a Public Offer for Acquisition (OPA).
It should be clarified that this measure cannot be taken without further ado. There must be objective reasons for the regulator to suspend a listing. Even so, in countries like Spain, there is a certain discretion on the part of the National Securities Market Commission (CNMV) that has been highly criticized by various experts.
Another type of precautionary suspension of very short duration can also be given, which occurs when the values reach high volatility. In this case, operations are only paralyzed for a few minutes to give investors time to react.
Let’s see some of the consequences of this measure for listed companies.
- First of all, your securities will not be able to be traded during the suspension, however, you must continue to meet your trading obligations.
- These companies do not usually disappear, but there is a high risk related to investors that must be managed.
- Although the suspension is temporary and is usually hours or days, in some cases where it ends in bankruptcy proceedings it can last for months or years.
- Shareholders cannot sell their titles on the stock market, but they can look for buyers outside or sell them to the company that issued them.
Example of suspension of the quotation
To finish, we will briefly review some of the best known cases:
- Abengoa is a Spanish company (Andalusia) that was listed on the IBEX35. On November 25, 2015, it was suspended from trading by the CMNV of Spain due to a drop in its stock market price of more than 70%.
- Mediaset is a communication group that operates in Spain and belongs to MFE-MediaForEurope, a subsidiary of Fininvest. It was suspended in 2019 due to information about a possible takeover bid by its Italian parent company, which it subsequently denied.
- The coronavirus crisis affected the Mexican stock market in 2020. This resulted in a general suspension of operations for 15 minutes.
- BBVA Leasing México, SA saw how some of its titles had a suspension of listing in 2022, also of short duration.