Aspira Women's Health (NASDAQ: AWH) stock should rise 1,500% today. That follows yesterday's 13% fall. Which gives us an interesting insight into the difference between nominal price changes and real price changes. That 13% fall was a real price change, the company as a whole is worth 13% less, any stockholding is worth that much less. The 1,500% rise today is a nominal price change. The market capitalisation won't change nor will the value of any holding. We'll just have 15 times fewer pieces of stock in issue.
The fall came from the results announcement which, while better than before, is still not good. Expenses are down, sales are up, the loss was curtailed. But it's still true that overhead costs - not even R&D, just overheads - are higher than total revenues. In a company just launching a product we might think this is fine. But the main product line has been on the market for well over a decade now. You know, possibly we might think that there's not about to be a breakthrough? The market they're in - diagnostic tests for reproductive issues - could indeed be very exciting. It's just that that doesn't seem to be coming through in the numbers.
Aspira Women's Health stock price from NASDAQWe know what happens with pharma companies - they live off shareholder capital until they make it. So, if they've not made it so far then they're still eating stockholder capital. Which Aspira is and does. They've actually gone (split adjusted) from some 300k shares back in 1997 to 100 million.
However, as we can see the stock price is below the NASDAQ $1 minimum bid price. So, a reverse stock split to get it back up and save the listing. That's the 1 for 15 which produces the 1,500% rise. The listing has to be saved because Aspira will have to issue more stock in order to keep going.
At which point, well, how exciting is this? The base idea, those diagnostic tests, is good. It's just that reality has failed to produce the desired sales growth. That's still bumbling along at a handful of $million a quarter. And after more than a decade how much better is this going to get?
Another way to put this is that the reverse stock split is a precursor to raising more capital. And why would we want to pump more into Aspira?