Acorda Therapeutics (NASDAQ: ACOR) stock should rise 2,000%, that's x 20, at the open this morning. This isn't anything of any great importance, it's a purely nominal price change. Of course we've got to take note of it but there's little to nothing about it that should change any trade or investment plans that we have for the stock. Only the mildest of influences that is.
Acorda stock is actually up by 50% over the past year, it has been up to double that too. The last results showed a loss, of course, but the EPS of minus $0.69 was a beat of $0.42. However revenue of $22.8 million was a miss by over $8 million. So, these results from ongoing business are a bit of a mixed bag. And it's also not true that the stock price is stuck in the doldrums, nor that it seems to be going nowhere.
Internally the company has around $30 million in cash and a loss per quarter of $16 million. Given that there's actually a real business in here, they're selling stuff as well as just doing research, that could change rapidly. But using the conventional measures we'd say that they've a 6 month runway. Which is what is causing this stock price rise this morning - they've likely to need more capital soon enough, which means they need to keep that NASDAQ quote.
Acorda Therapeutics stock price from NASDAQ
Note that the price there is already post stock split adjusted.
Nasdaq - as with the NYSE - is subject to a fashion, a cultural habit. A stock price of less than $1 is clearly a penny stock. But this comes with all sorts of connotations of not being quite right, of being disreputable. Therefore, to stay on the major exchanges you must meet the minimum bid price of $1. And if you might need to raise money - as a loss making pharma stock might well need to - then you want to be on NASDAQ. That's where the liquidity is and the capital raising possibilities.
So, something must be done to get the stock price up over the $. The answer is the reverse stock split. Simply declare that 20 pieces of the old stock are now one of the new. This doesn't change - not directly - the value of the company overall, nor of any individual stockholding. It just changes the number of pieces of paper that make up each of those - and therefore the value attached to each piece of paper.
Which is what Acorda has just done, a 20 for 1 reverse stock split. The real price change here will be however much Acorda changes differently from that 2,000% this morning.
