Astra Space (NASDAQ: ASTR) stock should jump 1,500% this morning. ASTR stock has been volatile this past couple of days, down 23%, up 19% - and as math geeks will know, that doesn’t take the price back to the starting point - as the company launches a stock issue and starts to sort out its capital structure. This 1,500% rise is not a real price movement, unlike those others, but it is a moving part of that same whole process. It’s necessary in order to maintain the Nasdaq listing.
As we might imagine, given the name, Astra does stuff in space: “Astra Space, Inc. designs, tests, manufactures, and operates launch services, and space products and services in the United States of America. It operates through Launch Services and Space Products segments. Launch Services segment provides launch services to satellite operators and government, which conduct the launch operations from Pacific Spaceport Complex in Kodiak, Alaska and Cape Canaveral Space Force Station in Cape Canaveral, Florida.”
The problem is that it’s not doing the volume of business to cover its overheads. Thus there are continuing losses. Some of which are covered by changes in contingent liabilities but all of which are a cash drain. Therefore the stock issue of around $100 million, to replenish those coffers.
Astra Space stock price from Google Finance
The problem then becomes keeping that Nasdaq listing. The main US markets have a $1 minimum bid price rule. Not because all penny stocks are run by charlatans but because when charlatans do run companies, manipulate prices, they tend to do so in penny stocks. So, you can’t be on the major exchanges and also be a penny stock.
In the absence of being able to get the business itself sorted out the solution to this is technical. Simply declare that 15 old shares are now one new one - a one for 15 reverse stock split: “Astra Space, Inc (ASTR) will effect a one-for-fifteen (1-15) reverse split of its Class A Common Stock. The reverse stock split will become effective on Thursday, September 14, 2023.” This doesn’t change the market capitalisation of the company, just the number of shares that make it up. Therefore the stock price reacts, mechanically, with a 1,500%, or 15x, price rise.
This is the purely technical part of sorting out that capital structure for Astra Space. Once this is done attention can return to trying to sort out the business.