ENGlobal (NASDAQ: ENG) stock should rise 800% today. This 8x tise in ENG stock should not be taken as evidence that suddenly the oil services business has come right for them. Rather, there’s a specific technical problem that they need to solve and this is how they’re going to do so. Normally enough, for most companies in this sort of situation this one action would be the full cure too - for ENG there’s going to need to be another step as well.
The basic business line here: “ENGlobal Corporation provides engineering and professional project execution services primarily to the energy sector in the United States and internationally. It operates through two ENGlobal Corporation provides engineering and professional project execution services primarily to the energy sector in the United States and internationally” The problem is that it’s not been doing this very well.
That doing not very well then reflected in the stock price.
ENGlobal stock price from Google Finance
This then leads to the problem that must be solved. The main US markets (NYSE and Nasdaq) don’t like penny stocks. The thought is not that they’re bad or anything, it’s just that when bad things happen in stock markets - ramps, pump and dumps, manipulations - they tend to happen with penny stocks.Therefore you cannot be on the main markets and remain a penny stock long term - there’s a $1 minimum bid requirement.
That’s OK- just declare that 8 old shares are not one new one - a one for eight reverse stock split: “ENGlobal Corporation. (ENG) will effect a one-for-eight (1-8) reverse split of its Common Stock. The reverse stock split will become effective on Friday, December 1, 2023.” This doesn’t change the value of the company, just the number of shares that makes it up. So, the stock price reacts mechanically, up 800% or 8x. The minimum bid price problem is solved.
This doesn’t entirely solve ENGlobal’s Nasdaq listing problems. There’s also a minimum shareholders’ equity requirement which they hope to solve in the New Year. After all, that is a bit more difficult to deal with as it requires finding some real money from somewhere rather than just a paper shuffle as with this reverse stock split.
