Why ‘Delisting’ Is a Worry in China-U.S. Market Mess

The value of Chinese stocks listed on American exchanges has fallen sharply in recent days, as Beijing clamped down on its booming private-education industry shortly after reining in many of its biggest technology companies. Both moves came against a backdrop of rising tensions between China and the U.S. and discussions over whether one government or the other could force so-called delistings. The sudden drop in stock prices opened up another possibility: that some Chinese stocks could be delisted the old-fashioned way, by no longer being worth enough. But there are other pathways that could lead to a departure of some firms from U.S. exchanges. Here is a look at the possibilities and their potential impact.

It’s the process of removing a stock from a public exchange on which it’s been traded. The most common reason for a delisting is when a company runs into financial trouble and its value falls below a minimum set by an exchange for inclusion or it is purchased by a different entity. When a stock is delisted it can still be traded, in what’s known as the over-the-counter market, but OTC trading is less regulated, often lower volume and more volatile than regular exchanges.