Financial Mistake #9 – Delisted Stock – Yep, I got fucked
Well, my Q-FI-ians, my little Q-FI-aridos, it’s been a long time since I’ve delved into anything investment related, but when lighting strikes, I must report what it has hit. And that goddamn bolt of unforgiving electricity decided to strike my good ol’ brokerage account and light my hair on fire.
Mother Fucker. Grrrrrr (I’m trying to type out me looking mad and grinding my teeth but have no idea how to do it… haha. I know, what a joke of a writer I am. Anyway…)
I’ve previously delved into some of my biggest individual stock losses before in Financial Mistakes #3 if you were curious. But today I have a unique situation for contemplation that I have rarely seen discussed. So, let’s get after it!
Ever have a stock delisted?
No? Well good for you. Because I just experienced my first one.
Now, I’m going to be straight with you, I’m shooting from the hip today. Between work being nuts and slaving away at the relentless bidding wars of our house search in Southern California, I didn’t take that much time to research anything. So, if any of my shit is incorrect, fix me up with some good scratch down in the comments box below.
Alright, so here’s the fucking deal.
If you happened to own one of three Chinese stocks China Mobile (CHL), China Unicom (CHU) or China Telecom (CHA), your ass got royally fucked on Jan 8th (I think that’s the date, give me some leeway here). The feds delisted these stocks from the NYSE.
And it was a mess.
Here’s a snippet from a Motley Fool article explaining why:
“On New Year’s Eve, the New York Stock Exchange announced it would suspend trading in all three companies from Jan. 7 to Jan. 11 and start the delisting process. The announcement caused all three stocks to tumble. But on Jan. 4, the NYSE abruptly reversed that decision and said it wouldn’t delist the three telcos — and then just two days later, it flipped its position again and said the delistings would proceed.”
Of course, the feds always fuck shit up. But getting back to me, because if you don’t remember I am the axis for all things great in this universe, I watched as my holdings in China Telecom (CHA) went up and down like the stock was some sort of fucking wave crashing on the beach of my demise.
Good, bright, honest and more respectable than a toddler left out on the street corner (I know, what the fuck does that even mean? Think about it my friend… think deeply… and it will come), your boy Q-FI bought some China Telecom (CHA) back in the day.
Why?
Well, let me tell you. I used some fucking high-tech algorithms I stole from Silicon Valley and a little slice of left-over rocket science from Caltech that was burning a hole in my back pocket. Here was my thinking: people are becoming more and more addicted to their phones. China has the most people. Therefore, a China telecom stock must be a no brainer. Only more and more people will become addicted to screens, so why not invest in the most populous country in the world.
Hahaha… see my deep thinking and tech brain. Yes, pretty impressive. Sometimes I even take a moment to look myself in the mirror and wink at the magnificence boiling out of the tea kettle’s spout.
Now, let’s take a step back for a moment and not get into China and Trump and trade wars… yadda yadda ya. All you need to know is that if you happened to own one of these stocks, they were frozen.
At first, I wasn’t too concerned, because I had been down this road before, not the delisting part, but having a stock shifted to the OTC (over the counter) markets. I figured no big deal, it will keep trading, just on a different exchange.
And there was my mistake.
Uncle Sam was going to prove one crafty and shrewd poker player. I thought America was bluffing like we always do in trade wars, but no, not this time. This time the good ol’ red, white and blue fucked its own shareholders, investors and free-thinking citizens.
From same Motley Fool article linked above:
“Some investors likely assume the delisted stocks would simply be moved to an OTC (over-the-counter) exchange, where they could continue trading, or they could trade their ADRs for Hong Kong-listed shares. However, the new law targeting China’s state-backed enterprises specifically bars delisted Chinese companies from retreating to OTC markets. It also prevents U.S. citizens from owning the shares on other exchanges.”
I really don’t like it when big brother tells me what investments I can own. You want it off the NYSE mammoth government entity that holds my insignificant life in its hands, fine, I get it. You’re worried about some spying and James Bond shit. Cool. You got the power. Do it.
But when you tell me I can’t even own shares on the OTC markets, I draw the line there. Fuck you. That should be my decision where I want to put my money and what risks I want to take.
Alright, now that I’ve blown off some steam, let me tell you what I did.
As I mentioned before, I had been watching my stock’s epileptic gyrations and expected that if it were delisted, it would simply just rollover to the OTC markets. However, after the delisting officially went down, I sign into my brokerage account the next day and see my CHA stock just sitting there with a dollar amount but no ability to trade.
Just frozen.
It was a trip. I had never seen that before. It was fucking literally frozen in time, sitting there and staring at me like an innocent man in a jail cell. My goddamn CHA shares had become the fucking Shawshank Redemption! Erroneously and barbarically locked behind bars out of my reach!
Yet, there was nothing I could do, I had no way to rescue them from the big bad wolf. My only option was to wait and hope like some sorry ass sucker that someday my stock got relisted on the NYSE so I could trade it again.
And the most bizarre thing is these three Chinese companies are doing just fine. They didn’t go bankrupt or anything. Nothing changed for them at all. They’re still making money and doing their thing – only the US investors were the ones that got screwed.
So, I sat there and sulked like a pre-madonna refusing to go on stage – stirring with my finger this bizarre mess of a beautiful martini mixture, one part pissed off and one part pure desolation.
And then an interesting thing happened. A few days later, I received an email from my broker saying this:
“As previously communicated, after the close of business on January 8, the New York Stock Exchange (NYSE) delisted the above securities in accordance with EO 13959. This email is a courtesy to inform you:
- While the securities have been delisted by the NYSE, the effective date for EO 13959’s trade restriction requirement has been amended to March 9.
- As a result, it may be possible for sell orders to be executed before the close of business on March 4.
- Execution of sell orders will be on a best-efforts basis; we expect limited market liquidity and difficulty finding trading partners or buyers for these stocks.
- Purchases are still restricted due to ongoing issues of limited liquidity.”
Well, well, well… that is very interesting. Here I am sitting with basically worthless stock so why not give my broker a call and see what can be done?
So, I call my broker, and they tell me that I can put in a manual order to sell all of my shares if I want – but they can only quote me the current price that is not guaranteed.
Now, I’ve been down this road before. I’ve owned publicly held companies that have gone bankrupt and it fucking blows. Losing all of your investment is never the way to go. Better to at least salvage some loss and live to trade another day.
So that’s exactly what I did. I said sell that shit baby… sell it all! Slap it down on black and let’s see what the roulette wheel spits back at me.
The result: I was able to get $0.60 on my dollar. So, basically I got back a little more than half of my original investment. It was actually better than I had hoped.
But what’s the lesson learned you’re asking? Sagely Q-FI, bequeath ye me your almighty wisdom. Well, here you go. I’m going to be telling you this same thing until the day I die. The whole point of this worthless article and excessive diatribe is this:
Buying is the easy part. It’s knowing when to sell that makes a great investor.
I, Q-FI, am obviously not a great investor. I just got my ass handed to me. But, I sure don’t see China Telecom being re-listed again on the NYSE anytime soon. So, I decided to cut my losses and move on to the next opportunity.
It was a painful learning lesson with the delisted stock, but now I’m a little more wiser, and a little poorer… hahaha. Don’t worry it wasn’t a big amount that I lost. But it’s the ego that got bruised. I had a chance to act sooner and didn’t.
Oh well, live and learn my friends.
Until next week.
-Q-FI
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P.S. Someday I should write about all of my big wins and how smart I really am instead of these hard lessons learned… hahahaha. So, has anyone ever had to deal with a delisted stock before? Or anything like this? It was a bizarre one no doubt, so if there are any trading or financial experts reading this (not sure why you would be), but if you are, please enlighten me. Word homies!
Sorry to hear about that, but in my opinion, you’re not a “real” investor until you pop your cherry on the de-listing of an individual stock. So, the good news is you’re now totally legit!
Mine was a Savi Media – a company that allegedly created a contraption that increased gas mileage and reduced emissions by a zillion percent or something. My mentor worked with a gal whose husband was the CEO and this company was gonna blown up crazy large with contracts in the pipeline for the vehicles of all CA state agencies. They started on Pinksheets and got to OTC status. Stock price was fractions of a penny and I put in $2K knowing it was a “lottery bet” and I’d likely lose it, but you never know. My stake ultimately got to $250K and I didn’t sell because I am an idiot. Things went to shit shortly thereafter when they didn’t get the government contracts, became effectively insolvent, stopped filing quarterly reports and after a few years, finally got delisted.
While it wasn’t amazingly pleasant at the time, In retrospect, it was totally worth the couple grand for the story alone and the multi-year ride. Way more fun than walking down to the liquor store every week to buy a Powerball lottery ticket, because that’s what it really was.
That is a wild story. Dude $2K to $250K and then losing it all. Yeah, my deal wasn’t anything like that amount. I think the most interesting thing about my situation was the US making it illegal for a citizen to own any shares on other exchanges. That’s what really screwed me and something I never even contemplated might happen.
But that’s a great story Mr. Fate and thanks for sharing. You make my situation look like a whining little kid… hahaha.
Wow! I’ve never had to deal with owning a de-listed stock before. I know there’s been some rambling about BABA potentially getting de-listed…I bought and continue to buy BABA and some other Chinese stocks listed on the NYSE. I didn’t take the threats too serious, maybe I should. I was hoping it was just the previous President’s typical blustering. So does that mean you couldn’t just buy these stocks on the HKEX? If you can, will you? Or do you only stick to companies listed on the domestic exchanges?
I appreciate you sharing what happens if a stock of yours does go through this process. Does not sound fun. I agree with you that there’s a lot of potential in China and in Asia in general for the coming decades. I tend to have the majority of my foreign investments in the “safety” of VFWAX where I don’t have to worry too much about de-listing.
What’s up Noel? Yeah, so normally on the delisting, your shares would just transfer to the OTC markets and you keep trading. However, as I mentioned to Mr. Fate, the US making it illegal for a citizen to own shares of the companies is what killed me. That’s a good question on buying on the HKEX – I’m not sure if you can or not for these stocks. Normally you would, but since the SEC has deemed these three companies a security threat, it’s a little murky. Personally, even if I could, I wouldn’t buy any shares. This was an older investment that had been sitting for awhile, so the situation was interesting and annoying, but not a major loss.
I was also going to originally hold the stock, thinking Biden would just reverse the SEC order. But the more I read, it looked like Biden most likely would never reverse the decision because it was deemed a “national security threat” and even if he did, it wouldn’t be any time soon. So that made me just want to sell and be done with it.
But like you, I’m mostly an index investor, so rarely do these fun little shenanigans ever arise for me anymore. That’s why I thought it’d be a good little tid bit to share.
Ouch! Sorry for your loss Q-FI.
I’ve had companies go bust due to fraud and incompetence.
I’ve had companies re-domicile to skip out on legal liability.
I’ve had public companies taken over by illiquid unlisted private companies.
But I can’t say I’ve ever been screwed in quite the way you describe here. If it is any consolation, one of the two remaining analysts covering CHA still rates it a neutral holding… which in banking speak screams sell, even though the general public thinks it means hold fire.
A seldom discussed feature of passive index trackers is that while you still get screwed when this stuff happens, for the most part you no longer care or take it personally.
I know my loss is nothing like battling the lockdown kitten daily, but I try to keep a level head… hahaha. I’ve had two of your three stock fiascos happen as well, but this one was the most bizarre by far.
Thanks for the tidbit on CHA. It was an older purchase that I had left sitting for a long time, so no real big deal, more just annoying all the steps I had to go through. Plus, seeing it frozen was a trip. That’s the first time I’d ever seen anything like that, or had it happen in my brokerage. But as I mention, it was my fault for not understanding it couldn’t transfer to the OTC markets. That mistake was on me.
And you’re spot on with the index fund take, hence, why most of my investments are of the passive, low cost nature. You eliminate the single stock risk, which I mostly enjoy today.
Thanks for chiming in Indeedably!
Not quite delisted, but a close second I had a company bought out for cash by another company for 1/20 of my initial investment during the dot com era. Was only 7 months after I bought so it really stung. It was sold for its patents essentially as the company was folding behind the scenes. Big reason I don’t buy individual stocks anymore. I suck at it. Also bought Nvidia at ipo week for 14 bucks and sold it for 20 before buying said stock. Given how many splits they’ve had over the decades that thousand would be worth 300k or do today…. so there is also that.
Yeah… oh the ones that got away – selling too early or kicking yourself for not buying. Just got to let it go, and we get over it with time. But those can definitely sting for awhile. I also have my own laundry list of those as well. Thanks for sharing your experience FTF.
Wow. Just saying “that sucks” doesn’t cover what you experienced, but nonetheless… I’ve never had a stock delisted, but I watched a stock rise, then drop, drop, drop and I finally sold at a huge loss. This was 20 years ago, so I don’t even remember the numbers involved. I was young, so fortunately it wasn’t catastrophic. And I’ve obviously recovered since then. You will too, but what a time to deal with this financial blow — right when you’re battling bidding wars.
Other than having previously owned an emerging markets fund and an international fund, I don’t invest in foreign countries, particularly China. I just don’t trust most other nations, especially developing ones. Too many places cook their books – not that we’re never guilty of it, but we at least have some level of regulation. But I can totally see your rationale for investing in Chinese stocks and actually considered it previously. I just don’t trust them, though, especially since they steal so much of our intellectual property.
Hang in there with the house search!!
I bought my shares pre-Trump, so things were a little quieter back then and the relationship with China hadn’t soured so much. Nowadays it is more of a risky proposition. I probably should have sold this one awhile ago, but oh well.
That’s interesting you don’t really invest in foreign countries. You do make a good point, that the US is the most consistent and reliable with regulation. I’m way tilted to the US as well because of the home country bias, but I do think the world will catch up at some point so I still like hedging some exposure as you mention to a broad international or emerging markets ETF.
The good ol’ house search is plugging along. Thanks for the motivating words. Got some hot prospects to report on soon. But, I really hate this fucking process. Hahahaha. I don’t do well when I’m trying to use logic and other people are making emotional buying decisions. But the current market is a trip. At least where I’m at, very little inventory and if people really want that house, they’re going nuts for it – like $70K-$80K over asking. Wild shit and it’s just driving prices higher and higher because people are willing to pay. My fingers are crossed I’m doing this process once and never again. Haha. But we’ll see… time has a way of playing games with us.
Thanks for chiming in and sharing your experience Katie!
There’s a blogger I follow who was involved in cattle futures etc who left the game; she always says that If you can’t defend it (with a gun) or you don’t have it in your hand the you don’t own it. I have 6 figures in my retirement accounts with my wife, but I feel like it’s all almost fake. I think I need to buy some rural land and put a little house on it? Maybe if you were “too big to fail,” this wouldn’t have happened.
Hahaha… I like that saying a lot Glincoln. I think real assets vs paper assets also comes down to liquidity. You might be able to defend the rural land with a gun, but selling it in a crunch isn’t as easy. Thanks for sharing that bud.
But you’re right. Sometimes paper assets can feel like funny money. The stock market is a fickle thing.
I also made an investment in BABA, during the disappearance of Jack Ma. I thought there was a 5% chance BABA would be follow a similar fate, but made the investment anyway.
When you bought shares, did you invest directly in these companies stock or were they set up like BABA where US investors buy a “holding company” that invests in the Chinese company?
I’d be interested to know if there is a difference.
I bought whatever was being offered on the NYSE under the CHA ticker – so I wasn’t buying direct shares from the HKSE. Per your question, I don’t actually know the answer – that’ probably why I lost a good chunk of my investment, not paying attention to the details…. Haha. My guess is the structure depends on SEC requirements and would have probably been the same as BABA.
dude, i would be a cheesed off as you over this revolting development. i’m not even sure what you would do about it other than what you did to recover something. i own alibaba and jd.com and am always a little wary because they’re chinese. remember luckin’ coffee making up sales number last year and getting caught?
my best goof from the orient was a b.s company called new dragon asia. they supposedly made instant noodles over in china and were hot on the message boards when i started investing around 2006. they are gone now and i really don’t know if they really ever made any damned product!? i lived and learned on that one.
Yes, there was some cheese going off… haha. This was a first one for me that the US barred its citizens from owning shares on any exchange. But, another good learning lesson.
Thanks for sharing your best goof – I loved that, instant noodles. It’s always entertaining to hear what was that one good loss/learning experience from other investors.
Ah, what is it “they” say, whatever doesn’t kill you makes you stronger….sounds like one of those times to me!
I’ve not had the dubious honour of going through a de-listing but I have enjoyed/endured the fun of a bankrupt stock. But my personal fave was late ’19 when my trading platform collapsed. 18 months without being able to access or trade my holdings whilst watching them go up/down like crazy through the ensuing drama. Nice.
So I’m totally with you on the how crazy it feels when you can’t execute how you want to. Happy to take my own risks but that kind of extreme liquidity risk – no thanks!
Now that sounds like a story worth telling and to write about. Have you already written about it on your blog Michelle?
I’m complaining about a week of frozen stock and you had to endure 18 months! That is insane. I have never heard of anything like that. I would definitely be freaking out.
I’m slow in replying per usual! – sorry! Funnily enough I did get round to writing about it – figured it may help a few others avoid having everything in one place. Diversify your platforms as well as your holdings 😉 It’s the asset liquidity one if you want to check out just how mental it can be!
Cheers.