Delisting of stock options

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Topic Author
Caduceus
Posts: 3526
Joined: Mon Sep 17, 2012 1:47 am

Delisting of stock options

Post by Caduceus »

I noticed that options of DIDI (the Chinese ride-hailing company that's been all over the news lately for being caught between US-China regulatory pressures) were trading at values far exceeding 0 all the way up till the day that the stock was delisted, and I was hoping someone could explain to me why anyone would want to hold those options.

I had assumed that the options would essentially lose their value once DIDI was sure to delist because the US-listed shares would cease to exist. But, even after DIDI made clear that it was definitely going to delist from the US exchanges, DIDI option holders didn't seem to discount those options very much at all. Is it because the options are based on underlying shares of DIDI, and this has nothing to do with whether the stock trades on the US exchange, on some foreign exchange, or over-the-counter? Or is it because there's some background mechanism, invisible to retail investors, whereby the underlying on which the options are legally based on have been "swapped" for the foreign shares in order to make investors whole?

I read somewhere that corporate actions in general - like stock splitting, spin-offs, etc. - will not affect option value and that the options will be adjusted/restructured by the appropriate authorities and I was wondering if this was such a case. I'm curious if option holders of DIDI simply began automatically holding options of DIDIY (the ticker symbol for DIDI on the OTC market) after the delisting occurred.
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