Lion Group (NASDAQ: LGHL) stock should rise 5,000% at the open. The LGHL stock rising 50x is though a purely technical change. This is not something that#s going to change, not directly, the valuation of the company nor of any individual stake or holding in it. The specific problem to be solved is that Lion is in breach of the NASDAQ listing requirements. Therefore something must be done or the listing itself will be lost.That something includes getting the stock price up.
As to what is actually done at Lion Group: “Lion Group Holding Ltd., together with its subsidiaries, operates a trading platform for corporate clients, individual traders, and retail investors. Its trading platform offers a range of products and services comprising contracts for difference trading, insurance brokerage, futures and securities brokerage, total return swap trading, and asset management services. The company's trading platform allows users to trade various futures products on futures exchanges worldwide,” The major part of the business is contracts for difference brokerage. This is the one area of the financial markets here things are different.
With a brokerage the broker simply brokes - that is, is the agent who organises the details. With CfDs the provider is the principal - clients are trading against the house. What matters here is that Lion Group seems to be not very good at being the principal: “Total revenue for the year ended December 31, 2022 was largely affected by trading losses in CFD and TRS trading services,” They're losing in their trades against their customers.
Lion Group stock price from NASDAQ
Lion Group stock is down 92% over the past 12 months as a result. This is what brings the problem. The American markets have this custom, that penny stocks are somehow not quite reputable. Therefore penny stocks cannot remain on the NASDAQ or NYSE exchanges. If a company wants to keep the listing it must get the stock price back up above the $1 minimum bid price. The way to do that is a reverse stock split. Simply declare that what used to be 50 shares will not be one - a one for 50 reverse stock split. “Lion Group Holding Ltd. (LGHL) will effect a one-for-fifty (1-50) reverse split of its American Depositary Shares and a ratio change from one (1) ADS representing one (1) Ordinary Shares (1:1) to one (1) ADS representing fifty (50) Ordinary Shares (1:50). The reverse stock split will become effective on Thursday, July 13, 2023.”
Purely mechanically the LGHL stock price will rise by that 5,000% to something like $5 each. The real price change will be whatever the price change is that isn't 50x.
