Shares of the electric truck maker Nicholas (NASDAQ:NKLA) were trading sharply lower Thursday morning, after the company announced in a regulatory filing that it would conduct a 1-for-30 reverse stock split next week.
As of 10:30 a.m. ET, shares of Nikola were down about 23.3% from Wednesday’s closing price.
Nikola’s reverse stock split will be more dramatic than expected
The upcoming reverse stock split isn’t much of a surprise to shareholders, but one key detail is new. At Nikola’s annual meeting on June 5, shareholders approved a proposal authorizing Nikola to carry out a reverse stock split at a ratio between 1:10 and 1:30.
The decision to proceed with a 1:30 split, the most aggressive allowed under the adopted proposal, was made by Nikola’s board last week and revealed in a Securities and Exchange Commission report ( DRY). deposit Thursday morning.
The split will be effective immediately after the close of the American markets on June 24, next Monday.
Why Nikola’s reverse stock split is not a good sign
Reverse reverse stock split are generally not optimistic. They typically occur when a company’s stock price falls below $1 for an extended period of time. Nikola’s stock hasn’t closed at $1 or higher since April 9.
Nasdaq requires publicly traded companies to maintain a minimum trading price of $1. If a company’s stock price falls below $1 for 30 consecutive trading days, the exchange sends the company a formal notice informing it that it has 180 calendar days to recover. compliance. If this is not the case, it may be deregistered.
There are two obvious ways for a company to get back into compliance: announce news that raises the stock price or do a reverse consolidation.
Nikola’s decision to do a reverse split, and specifically a 1-for-30 reverse split rather than a 1-for-10 split (or something in between), suggests that the board does not see the The truck maker’s stock prices soar. his soon.
Added to this is a certain nervousness among investors following the start of electric vehicles. FiskerNikola’s bankruptcy filing earlier this week is likely why Nikola shares are down sharply today.
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John Rosevear has no position in any of the stocks mentioned. The Motley Fool recommends Nasdaq. The Motley Fool has a disclosure policy.
Nikola’s shares are collapsing. Its board of directors made a grim decision. was originally published by The Motley Fool
