Recruiter.com (NASDAQ: RCRT) stock would rise 1,500% at the open today. RCRT stock rising that 15 x is not evidence that they’ve suddenly found the way to make the company successful and profitable. Rather, that they’re going to deal with one specific problem the company has and do that in the efficient and sensible manner. They’ve a problem with the numbers associated with the stock price. So, to deal with that change the number of pieces of stock - the stock price then moves, mechanically, to compensate.
As to what they’re up to at Recruiter: “Recruiter.com Group, Inc. operates an on-demand recruiting platform in the United States and internationally. It offers consulting and staffing services for the placement of professional recruiters; and consulting and staffing personnel services to employers. The company also provides referrals of qualified candidates to employers; and subscription to its web-based platforms that help employers recruit talent. In addition, it offers sponsorship of digital newsletters, online content promotion, social media distribution, banner advertising,” And so on. It’s not an obviously bad line of business to be in. Others are in those same areas and making good money. The problem at Recruiter.com is that they seem not to be all that good at it. They’re rumbling along on a couple of million dollars of revenue per quarter and making a loss on that.
OK, sure, they sold off the medical recruiting business but still. The business performance is what leads to the following stock price performance.
Recruiter.com stock price from Google Finance
The particular problem is that the New York markets associate penny stocks with disreputable, even fraudulent, actions. Not that all penny stocks are such, but that the frauds tend to happen with penny stocks. So, to remain on the main exchanges - Nasdaq, NYSE - you’ve got to maintain a $1 minimum bid price.
There’s a simple way to do this too. Simply change the number of shares in issue. Declare that 15 old shares will become one new one - a one for 15 reverse stock split: “Recruiter.com Group, Inc. (RCRT) will effect a one-for-fifteen (1-15) reverse split of its Common Stock. The reverse stock split will become effective on Friday, August 25, 2023.” This doesn’t change the market valuation of the company, just the number of shares. Som the share price reacts, mechanically - we’ll get a 1500%, or 15x, rise here.
Of course, this is the easy problem to solve as it does have that purely mechanical answer. Recruiter.com now still has to get on with sorting out the business….