Helius Medical Technologies (NASDAQ: HSDT) stock should rise 5,000% at the open. HSDT stock’s 50x price rise is, alas, a purely nominal price change. This will not, not directly, change the market capitalisation of the company nor the value of any specific holding in it. Given that the stock once traded at $18,500 or so - properly adjusted - this will not be of great comfor to long suffering shareholders. We’re still looking at a 99% and change loss here from those past peaks.
As to what Helius does: “Helius Medical Technologies, Inc., a neurotechnology company, focuses on developing, licensing, and acquiring non-implantable technologies for the treatment of symptoms caused by neurological disease or trauma. The company’s product is Portable Neuromodulation Stimulator, a non-surgical medical device intended for use as a short term treatment of gait deficit due to symptoms from multiple sclerosis and balance deficit due to mild-to-moderate traumatic brain injury, as well as to be used in conjunction with supervised therapeutic exercise.” We can imagine that as being a fairly sensible idea and even a potentially profitable one. But, sadly, that’s not the way it has turned out - at least not as yet. The last results had revenue for the quarter at $250k or so, earnings per share were minus six cents.
Helius Medical Technologies stock price from Google Finance
This financial performance drives the HSDT stock price, of course it does. And it’s that stock price which then causes a problem. The American markets think that penny stocks are the preserve of manipulators and fraudsters. This isn’t in fact true - rather, when fraudsters and manipultors operate they tend to do so in penny stocks. But the effect is the same. If you’re a penny stock then you cannot remain on the main markets. NASDAQ and the NYSE. But you’d like to remain on the main markets for the liquidity and this capital raising opportunities.
There is a solution to this, simply declare that 50 old shares are now one new one, a 50 for one reverse stock split: “Helius Medical Technologies, Inc (HSDT) will effect a one-for-fifty (1-50) reverse split of its Class A Common Stock. The reverse stock split will become effective on Thursday, August 17, 2023.” Which is exactly what Helius is doing.
This doesn’t change the market capitalisation of the company. It just changes the number of shares which make up whatever that value is. Therefore - and obviously - the stock price changes, mechanically, by 50x or 5,000%.
The end result is that we get a very impressive looking change in the HSDT stock price but the real price change is actually nothing at all.