If you own shares in a delisted ASX company, you’re probably wondering what to do. Some stocks have a happy ending in being taken over at a healthy premium, but some end up going bankrupt and leaving shareholders having lost all their money.
But it may not be the end of everything for investors even after the company delists.
What can I do if I own a delisted ASX company?
When a stock goes bankrupt and delists, there are a few options available to investors.
First, if the delisted company has assets that can be liquidated, investors may be able to receive part or all of their investment back. But this will be a long process and retail shareholders may not be at the front of the queue. Secured creditors will be first.
Second, if the delisted company is acquired by another company or is part of an asset purchase agreement, the investors may receive shares in the acquiring company. This may take a while, but if you own one you may be able to realise some sort of return on your investment, by selling shares in that company.
Third, investors may be able to pursue legal action against the delisted company and any responsible parties for negligence or fraud as allowed under applicable securities laws. They may not have the means to pursue legal action themselves, but they can join a class action with other shareholders that may be run by a professional legal firm.
In the latter scenario, you won’t be paying the costs – more prominent, richer investors will be.
What are the Best ASX Stocks to invest in right now?
Check our buy/sell tips on the top Stocks in ASX
But what about tax?
Investors may be able to take advantage of certain tax benefits associated with bankruptcy and delisting. Investors cannot claim the loss as a tax deduction, but they can use it to offset (in other words reduce) capital gains that they may have made during the year.
You have to calculate a ‘net capital gain’ in your tax return which accounts for all capital gains and losses. You then include that as part of your assessable income.
If you have no capital gains right now, we would recommend waiting until the other side of June 30. This will mean you will be able to derive a benefit in next year’s tax return if you make capital gains, by reducing the tax you’d pay on that capital gain.
Learn from your mistakes
If you have invested in a stock that has gone bankrupt and delisted, it can be difficult to come to terms with the fact that you may have made an investment mistake. However, it is important to remember that even the most experienced investors make mistakes from time to time. The key is to learn from these mistakes so that you can avoid making similar errors in the future.
It is difficult to address individual situations, but one scenario we often see is investors riding a stock to zero thinking it cannot go down anymore (either just holding it or sometimes even buying more shares at that lower price). But that ends up being the death of their investment.
Take some time to reflect on what went wrong and try to identify any patterns or decisions that could have contributed to your loss. It may be helpful to speak with other investors or financial professionals who can provide some perspective on your situation and offer some ideas for how you could have approached things differently.
Additionally, doing research into different investing strategies and techniques can help you become more knowledgeable about investing and better equip you for making sound decisions going forward.
Finally, as with any significant financial decision, it is always important to ensure that your investments are diversified and appropriately allocated within your portfolio based on levels of risk tolerance, personal goals and objectives. Taking a holistic view of your investments can help protect against extreme losses due to a single event like bankruptcy.
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