Doma Holdings (NYSE: DOMA) stock should rise 2,500%, or 25 times, at the open this morning. So, we're expecting a price around the $4.50 from yesterday's close of $0.18. This will not, sadly, be some stunning increase in our wealth as holders of DOMA stock - it'll be a purely nominal change in valuation. The overall market valuation will be about the same, the value of any particular holding of DOMA stock will be about the same. What'll change is the number of shares that make up the total of the company and of any holding. Thus, mechanically, the price of each share will change.
The background here is simply that the NYSE (as with NASDAQ) works to a particular American custom or fashion. Penny stocks are, well, they're penny stocks. That price of under $1 is the definition, obviously, but along with it comes all sorts of implications. One is that this is the sort of area where fraudsters and manipulators play. Not that this is necessarily true, but penny stocks just have some whiff of this sort of Wolf of Wall Street reputation. Therefore there's this custom, that penny stocks can't stay on the major exchanges like the NYSE or NASDAQ.
Doma Holdings stock price from NYSEThat this is just cultural can be tested. Different markets do have ideas about what the “right” price range for a stock is. In London it's £1 to £10, in New York $10 to $100. That difference is why an ADR of a London stock is so often 10 pieces of the Lonon quote - to get into that “right” range on each market. This part of it really is just fashion. Also, London doesn't take that next step of insisting upon no penny stocks - there are plenty well below £1, even some trading at fractions of a penny.
So, if business is unkind and performance not good it's entirely possible for an entirely respectable stock to fall into this penny stock range. Below that $1 minimum bid price necessary to be on the NYSE. At which point something must be done. So, something is done. Say, simply to declare that what used to be 25 pieces of stock are now just the one. A 25 for 1 reverse stock split, exactly what Doma Holdings is doing here. As above, this mechanically increases the stock price by 2,500% or 25 times.
And that's it, that's all that is happening. There could be some mild price change as a result of saving the NYSE quote. But the big change, that leap from 18 cents to $4.50 is a purely nominal change, of no great importance.
