Goodbye Kansas Group (STO: GBK) shares should rise some 20,000% this morning. This is not, sadly, evidence of some grand performance. Rather the opposite in fact, this - and similar price movements - should be taken as evidence of recent really very bad performance. For this is a purely nominal price change. It doesn't - or at least not in the first instance is doesn't - change the market capitalization of the company as a whole nor the value of any individual shareholding. What it does do is change the number of shares in issue, which means that if the total valuations stay static then each share must change in value. Which is exactly what is happening here.
GBK is performing a reverse stock split, or a consolidation to Brits. For every 200 shares at the close of business on Friday there will now be only the one in issue this morning. A 1 for 200 reverse split. So, logically, each piece of paper should be worth 200 times their predecesssors on Friday. That's where we derive that 20,000% forecast from. That's also the theoretical forecast, realty can be rather different:
Goodbye Kansas share price from Google
It's also possible to check prices on Nasdaq Nordic.
As we can see there the price quotation rose on Friday night - but that's after close for Nasdaq Nordic. After close, before open, same thing really. The real price change is that instead of moving by 20,000, it's moved by 25,000% (close enough). That is a real price change and one that might be worth thinking about. A reverse stock split does mean that the quotation is saved, that the listing continues. But it was well telegraphed, well known in advance. So that looks a little over-exuberant to us. We'd expect that premium to fade away in the early hours of trading this morning.
After all, nothing has really changed about the prospects of the company. We've a purely nominal change in price and so such a real change in valuation does seem excessive. We'd expect GBK to fall back today.