Yunji (NASDAQ: YJ) stock has fallen 80% this past 12 months and as much as 99% since 2020. But help is at hand, there should be a 1,000%, or ten times, rise in the price on Tuesday. Not that this actually makes up for the past performance, that's not how percentages work. It also doesn't make up for it in another way, in that this isn't going to be a real price move, it's a nominal one. The ADR will go from a 10 to 1 ratio to a 100 to 1. This is equivalent, in effect, to a 10 to 1 reverse stock split.
The larger lesson here is that we must, always, distinguish between nominal and real price changes. One of the reasons this is important is that we humans are prey to the number illusion - therefore we've got to concentrate just that bit and make sure that it's not us succumbing to it. Here, on financial markets, this number illusion effect is that we have some idea of what we think a share price “should be”. It's a cultural thing, because those appropriate ranges differ across markets. A good solid respectable stock price in London tends to be in the £1 to £10 range. For the US markets more like $10 to $100. That's just the way those two financial cultures roll. The problem arrives when a stock falls out of those culturally accepted ranges.
Yunji stock price from NASDAQ
This is the fate that has befallen Yunji - that price is now down at 20 cents or so. This is made worse by another American idea. Penny stocks are somehow not respectable. There's an idea - cultural again - that this is where all the conmen and manipulators play. So, the major markets (NYSE and NASDAQ) insist upon a $1 minimum bid price. Trade below that for long enough and they will take the stock quotation away.
The solution to this is that reverse stock split. Simply declare that 10 pieces of stock yesterday are now the one piece today. Which is exactly what Yunji is doing - with a slight twist. Yunji stock is not directly quoted, it's an ADR - American Depositary Receipt. So, the change will be that each ADR will move from representing 10 Yunji shares to 100. The effect is the same, a 10 for 1 reverse stock split. Therefore the price should rise by 10 times.
As we say this is a purely nominal price change, done to accord with cultural norms and no more.