Delisting Vs. Liquidation
When an ETF liquidates, investors generally receive cash distributions equal to NAV, so even if you fall asleep at the wheel, you will receive the fair value of your shares—most of the time. It’s worth noting, however, that there have been instances where the process wasn’t smooth.
For example, years ago, SPA ETF liquidated six U.K.-based ETFs and stuck investors with the liquidation bill—ultimately costing 10 percent of NAV. Exceptions aside, liquidation is likely to be a less costly and cumbersome affair than if the issuer decides to simply delist the ETF.
When an ETF delists without liquidating its portfolio, investors who fail to sell their shares before the last trading date will be forced to trade over the counter—a significantly less liquid, more cumbersome and generally more expensive process than trading on an exchange.