Thor Energy (LON: THR) shares will rise 1,000% at the open today. THR shares are not reacting to some glorious mineral find though, this is a purely technical change, It’s also a purely nominal price change - real money is not changed by this.
We’ve talked before about Thor Energy: “Thor Energy (LON: THR) is up 17% on the announcement of their ionic clay rare earth find at Alford East. Ionic clays are a valuable source of rare earths, how to mine such a deposit is well known. It's also true that ionic clays are higher in the desirable - and money making - magnet metals and lower in the money losing light rare earths than more traditional deposits. Of course, this is early days for Thor Energy and this specific deposit, much more work will need to be done to prove the resource. But it's good news for THR stock all the same.”
Well, that’s great, but it hasn’t exactly done wonders for the THR share price. It still being those very early days as yet.
Thor Energy share price from Google Finance
The problem is simply the range of the share price. Different markets have different ideas about what the “right” range for a share price is. In New York it tends to be $10 to $100 and a penny stock, below $1, will be thrown off the main markets. London is more liberal and in fact there’s a thriving market in such penny shares - especially among junior miners. Just the investor base is used to them and eager to play.
Even with that greater London liberality a share price that is fractions of a penny is considered pretty odd. So, the aim here is to get it up over a penny. Doing that is simple enough, simply declare that 10 old shares are one new one. A consolidation on the London market, a reverse share split on the US: “As a result of Resolution 1 having been passed at the General Meeting, shareholders have approved the reduction in the number of Ordinary Shares by way of a consolidation on the basis of 10 Ordinary Shares into one new ordinary share of 0.01p each ("New Ordinary Share") (collectively the "Consolidation").”
This doesn’t change the market capitalisation of the company, just changes the number of shares that make it up. Therefore the share price reacts in mechanical fashion, rising 1,000% or 10x.
Thor Energy still needs to find something worth mining of course but that’s a more difficult matter.