Momentus (NASDAQ: MNTS) stock should jump 5,000% at the open on Thursday. MNTS stock has not just discovered some value creation method that will shoot up like one of its rockets. Rather, we’ve a purely technical matter here. One that will probably lead to further actions, some of which might well then crater the stock price again, but this particular issue itself should be broadly value neutral. Any change in real value here will be about being able to save the NASDAQ listing itself and nothing more. For that’s what this is about, saving the senior market listing and nothing more.
As to what’s done at Momentus: “Momentus Inc., together with its subsidiaries, operates as a commercial space company. The company focuses on providing in-space infrastructure services, including in-space transportation, hosted payloads, and in-orbit services. Its principal and target customers include satellite operators.” OK, that’s clearly a growth sector, even if there’s also considerable competition within it.
The problem for MNTS stock is that the company isn’t at volume yet. For the latest quarter revenues were under $2 million, while costs of overheads and R&D were closer to $20 million. That’s only long term sustainable with access to considerable amounts of capital. Those are also the sort of numbers that explain the stock price.
Momentus stock price from Google Finance
To remain on NSDAQ you’ve got to meet the $1 minimum bid price for the stock. This is just fashion, perhaps culture. Penny stocks are where all the charlatans and manipulators hang out - so you can’t be a penny stock and remain on the major exchanges. If you are a penny stock like Momentus then something must be done. That something is just to declare that what were 50 shares become just the one - a one for 50 reverse stock split. “Momentus Inc. (MNTS) will effect a one-for-fifty (1-50) reverse split of its Class A Common Stock. The reverse stock split will become effective on Wednesday, August 24, 2023.”
The corporate valuation doesn’t change, just the number of shares that make it up. Therefore, and mechanically, the stock price changes by the same multiple - a 50 for one reverse split raises the stock price by 50x or 5,000%.
What’s likely to happen next might well change the real value. They’ve that around $30 million a quarter burn rate, they’ve around $20 million in cash and they’ve just acted to preserve their major market quotation where they can raise more capital. Yes, we think it likely that there will be a capital raise soon enough.
