Westport Fuel Systems (NASDAQ: WPRT) stock will be up 1,000%, that's 10x, at the open this morning. This is one of those price changes which means very little, almost nothing. For it's a purely nominal price change. The actual change in WPRT stock will be however much it doesn't change by 1,000% - another one of those proofs that we've got to worry about real price changes, not nominal ones.
A useful starting point is that given the worries over climate change then someone working on alternative fuel systems should be doing well. Say, LNG systems to allow diesel engines to use the alternative, and lower emissions, fuel that is natural gas. Someone able to put up a new technology that really caught on would of course be exceedingly valuable. But here's the problem when technology is entirely in flux as it is right now. There are many - many many - alternatives to the established technology. This is always true. This means that following one of the new paths - As Westport Fuel is doing - is no guarantee of success. For it might well be one of the other paths that actually becomes the new norm.
Say, EVs (even Tesla's Semi), or more local production requiring less transportation at all. Or efuels, or biofuels - you see the problem? While the use of traditional diesel might indeed decrease the production of one of the alternatives does not guarantee mass market acceptance of that specific alternative - everything is up for grabs at a time of technological change.
Westport Fuel Systems stock price from NASDAQ
The effect here is that Westport is not doing all that well. Recent results included: “Adjusted EBITDA decreased by a whopping $45.3 million year-over-year to negative $27.8 million”. So, no, the results aren't going the right way. The effect of this, naturally enough, is to depress the share price.
That brings with it a problem. In order to remain upon the Big Boy markets in the US (so, NASDAQ, or NYSE) it is necessary to stay above the minimum bid price of $1. This is a cultural thing, penny stocks are felt to be somehow disreputable. So, in order to keep the listing - and so the ability to raise capital and have liquidity in the stock - something must be done.
That something is the reverse stock split. Simply declare that what used to be 10 shares are now one. The corporate valuation doesn't change, just the number of pieces of paper that makes it up - therefore each piece of paper changes in price. As WPRT is doing a 10 for 1 consolidation therefore the stock price will rise 10x, or 1,000%. And that is all that's happening at Westport, a nominal price change, not a real one.
