Hycroft Mining (NASDAQ: HYMC) is up 16% as a result of a declaration by NASDAQ itself. This is, if we're sensible about it, an entirely trivial reason for the stock to rise. It shouldn't change our view of Hycroft at all. Which, from our point of view here at least isn't positive at all.
The background, small gold miner out in Nevada. A year and more back it looked like it was going to go out of business. Not for any specific reason other than it wasn't a very good gold mine. There was some talk of how if money could be raised then they could treat ore on site and so on. Then came the great AMC rise to meme stock status. This so refinanced AMC that they then invested into Hycroft Mining. Quite what a cinema chain saw in a gold mine, well, but they did.
Hycroft Mining share price from NASDAQ
As we've said elsewhere in the past Hycroft's a great story. It doesn't, at least so far, have a happy ending though and certainly not for AMC. The share price above shows that.
Which brings Hycroft into problems with the stock market authorities. The Americans have this idea that a share price below $1 makes a company a “penny stock”. They're right, in logical terms of course. But with that comes some implication of dirty dealing, of manipulation of stock prices. Even, claims of being some wonderful gold mine out in the desert. So, you can't be on NASDAQ (or the NYSE) with a share price below $1. You lose your quote and get relegated to the OTC. There the company will likely be worth less because of the loss of liquidity and the ability to raise new funds.
OK - so, when the price goes below $1, NASDAQ sends a warning. Sort it out. There's an easy way to do this, a reverse stock split, a consolidation to Brits. Everyone who used to have 10 shares now has 1, the price is 10x what it was, NASDAQ is satisfied. This is easy and cheap to do. It's also true that NASDAQ gives you some time to do this in. And that's why this 16% move by Hycroft is trivial.
NASDAQ has just told Hycroft that they've 180 days to sort out their below $1 stock price. OK, that's normal - 180 days is normal - and the solution is simple anyway. So why this should increase the valuation of Hycroft by 16% - well, maybe folk don't quite understand what's going in here? Yes, this does mean the NASDAQ quote is safe for another 6 months. But that could and would happen anyway. It doesn't make the gold mine any better, so why that valuation rise? Silliness?
