What is a Stuckholder

A stuckholder is someone unable to sell a stock, particularly one that is losing value, because the U.S. Securities Exchange Commission (SEC) has suspended trading on that stock.

Breaking Down Stuckholder

Stuckholder, a portmanteau of “stuck” and “stockholder,” refers to an investor who is temporarily unable to liquidate a position in a stock due to an action by the SEC.

The SEC can suspend trading on a stock for up to 10 business days when it believes a suspension is in the best interest of investors or the public. During that time, anyone holding that stock is a stuckholder. If a company falls behind in its filings, posts inaccurate information about its current financial condition or recent transactions or attempts to manipulate the market, it may draw a suspension, which the SEC issues without warning.

If the stock in question trades on an exchange, trading resumes automatically upon the end of the suspension. If, on the other hand, it trades over the counter (OTC), a broker-dealer must ensure that the company is compliant with filing rules before quoting the stock.  

A suspension is a black mark on a stock, and the price is almost certain to drop once trading resumes and stuckholders are again free to sell off their positions.

The Difference Between a Halt or Delay and a Suspension

Securities exchanges have the power to temporarily halt, in the middle of the trading day, or delay, at the beginning of the trading day, trading on a stock. As opposed to suspensions, which can last two weeks, halts and delays usually last less than one hour.

There are both regulatory and non-regulatory reasons a securities exchange may halt or delay trading on a stock. The most common regulatory halt is a “news pending” halt, which happens when the exchange pauses trading on a stock while the company informs investors of news that may change the stock’s price. The halt allows investors to determine the impact of the news before deciding whether they should buy in or liquidate their positions. An exchange may impose a regulatory halt while it determines whether the stock still meets the exchange’s criteria. Some exchanges impose a non-regulatory halt on a stock when there is a great difference between the numbers of pending buy and sell orders on the stock.

Because halts and delays do not necessarily reflect poorly on the stock, and therefore do not necessarily presage a price drop, investors holding halted or delayed stock are not properly stuckholders.