Cheer Holding (NASDAQ: CHR) stock should rise 1,000% today. That CHR stock rises 10x is not a signal that everything’s now going great with the Chinese advertising market. Rather, that they’ve undertaken a technical change in order to solve one specific business problem. That problem will indeed be solved by this action - it’s the rest of the business that will still need work. We’d also note the recent name change, this used to be Glory Star New Media and is now Cheer Holding.
The actual business line: “Cheer Holding, Inc., through its subsidiaries, provides advertisement and content production services in the People’s Republic of China. The company also engages in mobile and online advertising, and media and entertainment businesses. In addition, it operates CHEERS app, an e-commerce platform that allows users to access online store, live streaming, series TV shows, and online games, as well as online short videos, variety shows, and dramas. It is also developing CheerCar App, an interactive entertainment app; CheerReal, a digital collection NFT app; and CheerChat App, an overseas social audio app. The company was formerly known as Glory Star New Media Group Holdings Limited and changed its name to Cheer Holding, Inc. in November 2023.”
The specific problem that needs to be solved is the idea that they might lose the Nasdaq listing. For the American markets really don't like penny stocks. It’s not that everyone is indeed the home of fraud, but when fraud, pumps and dumps and so on do occur then they tend to happen in penny stocks. Therefore you cannot be on the major exchanges as a long term penny stock.
The solution to this is simple enough. Just declare 10 old shares to be one new one - a one for ten reverse stock split: “Cheer Holding, Inc. (CHR) will effect a one-for-ten (1-10) reverse split of its Ordinary Share. The reverse stock split will become effective on Monday, November 27, 2023.” As this doesn’t change the market capitalisation of the company, just the number of shares that make it up, the stock price should therefore react mechanically - up 1,000% or 10x. So, stock price problem solved.
This then leaves all those other business problems still to be solved of course.