Monster Beverage (NASDAQ: MNST) stock has just halved in price overnight. Which is a massive, massive, change for a company with a $50 billion plus market capitalization. It's also true that the market capitalization is up 2,27% at the same time as the share price has that halved. The explanation for this is that there are now also twice as many shares in circulation. Or, to put this another way, one of the changes in the share price is purely nominal, the other real.
The explanation for this is just fashion. No, agreed, a 50% price move based upon pure fashion seems a bit much but be assured, this is in fact true. Different markets - different financial cultures perhaps - have different ideas about what a stock price “should be”. In London it's from £1 to £10, that's just the way it is. In New York it's in the $10 to $100 range. This is why a US ADR of a London stock is typically 10 pieces of the LON share. So that the share price and the stock price can be in that golden zone in each market.
Monster Beverage share price from GoogleThe standard tickers are showing that MNST has indeed fallen 50% overnight. But that's because those tickers haven't been reprogrammed as yet - they will be over the day most likely. For what has happened is that Monster Beverages stock price was climbing up out of that golden zone, up above $100. So, each share has been split into two. All who owned 10 pieces of stock yesterday now own 20.
This is indeed just fashion, it's just the way the financial culture in New York works. But we should also note that the stock is up - in real terms this is - 2.27% premarket. Which also neatly explains why companies like to keep their stock in that fashionable range. Nothing of any importance has changed at Monster overnight, only that doubling of the stock count and the halving of the nominal price. But that's enough to move that stock price 2%.
Fashion, you see, matters. Of course, it's only those without a wife's dressmaking bills to pay who need to be told that but that is the way it works.