Fortress Biotech (NASDAQ: FBIO) stock will jump 1,500% or so at the open today. FBIO stock is not leaping because there’s been some sudden change in the acne treatment market. This 15x change in the Fortress stock price is, instead, a purely technical solution to a purely technical problem. The stock price is too low therefore something must be done to make it higher.
As to what’s done at Fortress Bio: “Fortress Biotech, Inc., a biopharmaceutical company, develops and commercializes pharmaceutical and biotechnology products. The company markets dermatology products, such as Ximino an oral minocycline drug for the treatment of moderate to severe acne; Targadox an oral doxycycline drug for adjunctive therapy for severe acne; Exelderm cream for antifungal intended for topical use; Qbrexza a medicated cloth towelette for the treatment of primary axillary hyperhidrosis; Amzeeq; Zilxi; and Accutane capsules for severe recalcitrant nodular acne.”
Well, we might think that’s a fairly steady market but the problem is that the stock price has been falling over time.
Fortress Biotech stock price from Google Finance
The problem this causes is that Nasdaq has a $1 minimum bid price requirement. It’s not that penny stocks are inherently bad, it’s just that the culture of the New York markets thinks that penny stocks are not quite right. Therefore, as a penny stock, you cannot remain on the main markets. This has an easy enough solution. Simply declare that 15 old shares are now 1 new one - a one for fifteen reverse stock split: “Fortress Biotech, Inc. (FBIO) will effect a one-for-fifteen (1-15) reverse split of its Common stock. The reverse stock split will become effective on Tuesday, October 10, 2023.”
This does not change the market capitalisation of the company, not directly it dosn’t. It just changes the number of shares that make up that value. Therefore the stock price reacts mechanically - the 1,500% or 15x rise in the nominal price. That’s then this specific technical problem solved and the Nasdaq listing saved.
The point to note here is that this is a purely technical and nominal stock price change. For something that will actually fill investor wallets they’ll need to get the main business line sorted out. Which is, of course, a rather more difficult problem.