American Battery Technology (OTCQX: ABML) stock should rise 1,500% at the open. The ABML stock rise of this 15x is not a reward for long suffering shareholders - it’s a purely technical move. Well, sometimes this happens although quite why ABML is doing this is unknown. It could be just a reaction to market fashion, it could be a signifier of an attempt to move up to NASDAQ. We’ve our doubts about that second move to be honest but then we’re not particularly fans of American Battery Tech as a company.
As to what’s done at ABML: “American Battery Technology Company, a battery materials company, engages in supplying battery metals. The company explores for resources of battery metals; and develops and commercializes technologies for the extraction of battery metals, as well as commercializes integrated process for the recycling of lithium-ion batteries.” They’re trying to build out a battery recycling plant, they’ve got some lithium mining prospect, they claim at least to have an efficient technology for the battery recycling. Clearly this is an area where there are growth opportunities. We’ve long had our doubts about the approach being taken here but that’s an opinion, not a fact.
American Battery Technology stock price from Google Finance
The specific problem ABML has, they’re trying to solve here, is that the stock price is below $1. We can look at this in two different ways, related but still different. One is that markets have ideas about what is the “right” price for a stock. On the main American markets this tends to be in the $10 to $100 range. There’s no particular reason for this - in London it’s £1 to £10 - but it is there, it’s a fashion or cultural thing. So, “penny stocks” are seen as being cheap and also somewhat disreputable. It’s not that all penny stocks are scams - not at all - it’s that the scams that do happen tend to happen with penny stocks.
So, simply declare that 15 old shares will become one new share. This doesn't change the market capitalisation, not directly, just the number of shares that make it up. Therefore the stock price reacts mechanically, a 1,500% rise, or 15x. This is what is being done with ABML, it taking effect at the open this morning.
The related, but different, issue is that a result of this fashion is that you can’t be on Nasdaq as a penny stock, not in the long term you can’t. So, sorting this out might be an indication that American Battery is looking to upgrade the listing. We’re unsure about that but if this is something they’re intending to do then this reverse stock split is one of the things they would do in preparation.