Liquid Media (NASDAQ: YVR) stock should jump 400% at the open. YVR stock rising 4x is nice, but be aware that this is in purely nominal terms. There’s no change to the real value of the company, nor any shareholding in it, involved here. The puzzle though is why is the company bothering to do this? It doesn’t, in fact, solve the problem they face.
Liquid Media faces a number of problems of course. One is that they’ve not filed their accounts on time. That’s a breach of the SEC rules anyway, but that also puts them in breach of the terms of their convertible debenture. The investor wanting their pound of flesh (and given the terms of that debenture, a 20% discount on issue, that’s not too harsh) might well become a more immediate problem than the SEC.
But YVR stock faces another NASDAQ problem. The price is below the $1 minimum bid price so it’s possible that the listing on NASDAQ will be lost. The solution there is simple, have a reverse stock split. But Liquid is having a 4 for 1: “Liquid Media Group Ltd. (YVR) will effect a one-for-four (1-4) reverse split”. At 16 cents that doesn’t get us back over $1 - therefore it doesn’t solve the listing problem. So, why are they bothering to do this?
Liquid Media stock price from Google Finance
There are other issues at the company. There’ve been a couple of episodes of speculation. In one of them we said this about Liquid: “The market in such a stock is always very thin indeed, little liquidity. The market liquidity soon after the opening of the premarket (at 4am) is always going to be very thin indeed again, a fraction of the normal trade. Yet here we've got a consistent stream of orders all for tiny sums (100 shares at 26 cents is only $26 an order) being repeated time and again. Almost as if someone was trying to boost that YVR share price during that time period of very limited liquidity.” That drove a 105% rise in the YVR stock price. Of course, four days later we also said this about YVR: “Liquid Media's stock price is rapidly returning to where it was before all of this started.”
There was another such burst of speculation two months later in Liquid Media: “Liquid Media (NASDAQ: YVR) stock is up 40% premarket this morning. Other than the usual idea of a small cap stock suffering a momentum trade there seems no grand reason for this. For that sale of Indieflix for a promissory note really isn't enough to trigger such a change in value. The thing is we've seen this before with Liquid Media. Two months back in fact. “
We don’t doubt that there could be further such episodes of transient excitement in YVR stock. But what does puzzle us is why they go through the fuss of having a reverse stock split and not actually solve the problem. The 4x rise will take them to 64 cents - that’s still well below the $1 minimum bid price necessary on NASDAQ. So, why did they bother?