Volcon (NASDAQ: VLCN) stock should jump 500% at the open. VLCN stock rising 5x is not the result of their electric bikes suddenly becoming fashionable or selling in volume. Rather, this is a purely technical move and also a move in the nominal, not real, stock price. This is something being done to solve one specific technical problem. And, as such, it’ll solve that one specific technical problem just fine.
We’ve looked before at Volcon: “Volcon (NASDAQ: VLCN) stock dropped 33% this morning on a bit of capital raising. Which isn't that unusual, more stock in issue usually does mean a lower stock price - simply supply and demand there. However, the money raised was actually in a convertible bond issue and that's a little different. The terms of the money raise still matter though and the general market reaction is that this money is expensive. But then when you need money, well, you need money.
“For those who don't know Volcon manufactures electric off road vehicles - bikes and quads and so on. It's entirely possible that there will be winners in this field just as Tesla has done so well in electric cars. But also as Lordstown, Rivian, Nio and so many others are showing it's not all that easy to do so. But we're at steam engine time again, there's a massive technological shift going on and all we as investors out here can do is try to predict who are going to be the - few - winners of this change.”
That money from the convertible issue was indeed expensive. There’s also been an invoice factoring agreement more recently, plus a small stock issue that raised a little bit of much needed cash.
Volcon stock price from Google Finance
A reasonable read on this is that Volcon really does need more cash in order to be able to finance it’s push into the market. But this specific price move here isn’t, not directly, about that. Indirectly it is about that of course. In order to be able to raise money - and Volcon has filed a shelf registration - it’s better to be on a higher level stock market than a lower, where there’s more liquidity and less dilution with any capital raise.
But Nasdaq has that $1 minimum bid price rule. Be a penny stock for too long and you lose the listing and are relegated to the OTC. To remain on Nasdaq, where capital can be raised, means doing something. That something is easy enough - just declare that 5 old shares are now one new, a one for five reverse stock split: “to effect a 1-for-5 reverse stock split of its common stock. The reverse stock split will take effect at 4:01 pm (Eastern Time) on October 13, 2023, and the Company's common stock will open for trading on The Nasdaq Capital Market on October 16, 2023 on a post-split basis,”
That solves the stock market problem but none of the others of course. A reasonable expectation is that there’s going to be more stock issued here soon enough. They simply need the money.