Thursday, June 20, 2024


Dhaka Tribune

ATI Physical will rise 5,000% - This is not a real increase in ATIP

A purely nominal price change in ATI Physical will not recover capital for shareholders, unfortunately

Update : 15 Jun 2023, 01:13 PM

ATI Physical Therapy (NYSE: ATIP) stock will rise 5,000%. This will look nice but it won't recoup the losses since the SPAC arrival on the markets some two years back. Since then there's been a 98% fall from the usual $10 price to the current under $0.20 cents. Yes, OK, there was a 15% rise yesterday on the back of the results but that's trivia compared to the overall performance.  

 ATIP does, well, physical therapy. We'd sorta expect that the base idea has something going for it. Americans are getting older - and that's not quite as stupid a comment as it seems, the percentage of older people in the population is rising, not just everyone's getting older in that traditional one day at a time manner. Despite all the talk about a terrible economy America is also getting gradually richer. So, more money being spent on the twinges and problems of age, why not? 

 Well, one reason why not is that they seem to be losing $26 million a quarter. Which isn't a great return on their apparent $1 billion in assets. The twin problems are that while there's a gross operating profit the overheads and interest bill are larger than that producing that loss. This is the sort of thing that can be solved by growth of course, growing into those costs. But that growth rate doesn't seem fast enough to be making a dent there. 

ATI Physical Therapy stock price from NASDAQ

 The business performance leads to that stock price performance of course. And that's where the specific problems is today. Stock markets have their fashions, their cultures, and one of those on the New York markets is that penny stocks are seen as not quite right. The home and province of manipulators and fly by nights - Wolf of Wall Street territory. So, there's an insistence on a quoted company maintaining the $1 minimum bid price. Fall below that for long enough and you will lose your NYSE (or NASDAQ) quote and be relegated to the outer darkness of the OTC markets.  

 Something, therefore, must be done. That something - in hte absence of being able to fix the business - is a reverse stock split. Simply declare that 50 shares, pieces of stock, are now one. The price should therefore rise 5,000%. Which is exactly what ATIP is doing, a 50 for 1 reverse stock split.

 This then produces that entirely nominal price change which brings the company back into accordance with the NYSE listing rules. Which is, you know, great. But we'd all probably prefer it if they'd achieved this the old fashioned way, by running the business at a profit instead.

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