Delisted stocks are often stocks that do not get a lot of attention unless they are big names and popular stocks. In 2020, more than 70 stocks were delisted from the major U.S. stock exchanges, according to StockAnalysis.
In 2021 the most notable delisted stock until now was Tiffany & Co., as the company was acquired by LVMH Moet Hennessy-Louis Vuitton (OTC:LVMUY).
In most cases, delisted stocks are removed from the main U.S. exchanges they used to trade on, and instead, they continue to trade “over the counter” (OTC). Not all stockbrokers offer OTC trading. This may harm the liquidity of their stock trading and lead to potentially increased price volatility.
The ownership of the stock remains the same during delisting unless of course, they are a severe factor such as bankruptcy which in theory should make these stocks worthless in the future. The main reasons for delisting stocks are financial or managerial factors, and the delisting can be either voluntarily, or as in the case of the Chinese stocks, involuntarily.
Here are four stocks that are soon to become delisted stocks in 2021 and what you should know about them:
- China Mobile Limited (NYSE:CHL)
- China Telecom Corporation Limited (NYSE:CHA)
- China Unicom (Hong Kong) Limited (NYSE:CHU)
- Naked Brand Group Limited (NASDAQ:NAKD)
Delisted Stocks: China Mobile Limited (CHL)
The first trading week of 2021 was very interesting for New York Stock Exchange and its decision on three Chinese telecom stocks.
The exchange considered, and then rejected, the notion of delisting China-based telecom stocks on Jan. 11, following President Donald Trump signing a new law that is designed to prevent Americans from investing in companies that Washington believes is supporting Chinse military and intelligence agencies.
Then the exchange reversed itself, deciding that the companies would be delisted in November. U.S. investors will be able to exchange American depositary shares in these three companies with shares listed in Hong Kong exchange with a different stock-for-stock exchange ratio.
The first of these, China Mobile, was incorporated in 1997 and is based in Central, Hong Kong. It provides mobile telecommunications services and has a market capitalization of $109.6 billion.
The stock has a very attractive trailing 12-month price-earnings ratio of 6.3 and a forward dividend and yield of $1.97 and 7.2% respectively. The stock fell in 2020 from about $45 per share to $28.54 per share, and now trades at $27.50
China Telecom Corporation Limited (CHA)
China Telecom Corporation is the second Chinese telecom company that will be delisted from the New York Stock Exchange in November.
CHA was incorporated in 2002 and is based in Wan Chai, Hong Kong. It provides wireline and mobile telecommunications services.
It has a market capitalization of $20.4 billion with a trailing 12-month P/E of 7.56. CHA stock has a forward dividend of $1.61 and a dividend yield of 6.09% respectively.
In 2020 the stock fell to a high price of $41.30 to $27.55 and now trades at about $26.40.
China Unicom (Hong Kong) Limited (CHU)
The third company affected by the NYSE decision is China Unicom (Hong Kong) Limited. The company was incorporated in 2000 and is based in Central, Hong Kong.
CHU It provides broadband and other Internet-related data communications services. The market capitalization is $17.4 billion, which is the smallest among these three Chinese mobile telecoms.
CHU has a trailing 12-month P/E of 18.8. Like all previous Chinese telecom stocks, it has an attractive dividend yield. The forward dividend is 21 cents and the dividend yield is 3.45% respectively.
The stock fell in tandem with the previous telecom stocks in 2020. From a high price of $9.30 in January 2020 it the closing price on the last trading day of 2020 was $5.68. It now trades just over $6.
Naked Brand Group (NAKD)
Naked Brand Group is a designer and retailer for intimate apparel and swimwear for men and women with a presence in Australia, the United States, Europe, and New Zealand, where the company has its headquarters.
NAKD stock is currently trading at about 45 cents per share, which is below the $1 threshold to be listed on the Nasdaq composite. Nasdaq has given an extension to the company until May 24 to give NAKD a chance to pull the stock price higher.
NAKD stock lost more than 62% in the last year but rallied more than 100% so far in 2021. The problem for the stock is that despite solid revenue growth for 2018 and 2019, the pandemic in 2020 had its severe impact. Revenue fell to $59.18 million in 2020, a decline of 23% compared to revenue of $76.94 million in 2019.
This revenue decline is not a major problem for NAKD stock. It is mostly the fact that the company is unprofitable for all years as of 2017 and losses have increased significantly in 2019 and 2020. Investors and traders have taken notice of this poor financial performance.
Poor fundamentals are the main cause for the stock price declining and the risk of being delisted soon.
On the date of publication, Stavros Georgiadis, CFA, did not have (either directly or indirectly) any positions in the securities mentioned in this article.