Adamis Pharmaceutical (NASDAQ: ADMP) stock has not done well for investors these past few years. 89% value destruction in the past 12 months, 99% in the past 5 years, 26% down just on the one day, last Friday. The ADMP stock price will rise by a factor of 70, or 7,000%, at the open on Monday. But sadly this will be a purely nominal price change unlike all those falls which were real money being lost. The reason is of course that the past performance has meant that a reverse stock split must be undertaken.
Adamis Pharma should, we might have thought, be doing well. They're working with allergy treatments and we all know that allergies are on the rise. They do opioid overdose reversal treatments - we're all aware that those are being used more and more. It's just that despite being in these right areas the company never really does seem to succeed. The last annual results (the 10K) showed that revenue was of the $5 million level, cost of goods sold was more like $6 million. So there's a gross loss - even before we get to overheads, research and all the rest. Add all of those in and we get to a $25 million loss for the year. It's possible to see why the stock price has been dropping. They also had a million in cash, not a lot to face such losses with. Sure, they issued more stock to raise $3 million but that's not a lot in the face of such results either.
Adamis Pharma stock price from NASDAQ
So, we can see why the stock price has been declining. The total market capitalisation is around the $8 million level which we could even think of as being remarkably generous given those financial numbers. That also gives Adamis a problem. They need more capital, obviously. Which requires being on a major stock market - but you can't stay on a major US market as a penny share. Something must be done. Which is that reverse stock split, or a consolidation. Simply declare that what used to be 70 shares are now the one share. A 70 for one split. All we've done is change the number of shares in issue, thereby changing the share price. Which takes effect at the open this morning - there should be a 70 times rise in ADMP.
But that price change, the 7,000%, will be purely nominal. It will keep the NASDAQ quote - which is probably why the price fell 26% on Friday. Keeping the quote means they might well try to raise more capital. Capital raises do tend to mean lower - real, not nominal - stock prices.
