Ayro (NASDAQ: AYRO) stock should be up 800% at the open today. AYRO jumping 8x is not because they’ve suddenly found a pot of gold behind the boardroom chairs - it’s a purely technical move designed to solve a particular problem. The difficulty they’ve got is that the past performance of the stock price is bad enough that they could be cut off from raising new capital. So, something needs to be done.
As to what’s done at the company: “Ayro, Inc. designs, manufactures, and sells electric vehicles for closed campus mobility, urban and community transport, local on-demand and last mile delivery, and government use in the United States. It provides four-wheeled purpose-built electric vehicles for universities, business and medical campuses, last mile delivery services, and food service providers. The company also offers AYRO vehicles to internal combustion engine vehicles for light duty uses, including low-speed logistics, maintenance, and cargo services;” Definitely an interesting part of the economy these days, well fashionable. But they’re not being notably successful or profitable at addressing this industry. Well, perhaps that’s fine given the newness of the interest in the field. But that does then lead to this problem.
Obviously shareholders would have preferred the inverse of that, starting at 49 cents and rising to $22 but it was not to be. The stock price fall leads to a specific problem though.
The American markets think that penny stocks are not quite right in some way. It’s not that all penny stocks are manipulated by frauds and charlatans, but it is true that when there are manipulations they tend to happen in penny stocks. So, you can’t be a penny stock and remain on the two main markets, Nasdaq or the NYSE. If you do remain a penny stock for long enough you lose the main market quotation and go down to the OTC. Where there’s much less liquidity and it’s more difficult to raise capital.
There is a solution to this, simply declare 8 old shares to be one new one - a one for 8 reverse stock split: “AYRO) will effect a one-for-eight (1-8) reverse split of its Common Stock. The reverse stock split will become effective on Monday, September 18, 2023.”
That is what is being done. This doesn’t change the market capitalization, not directly it doesn't, it just changes the number of shares that make it up. The stock price therefore reacts, mechanically, going up 800% or that 8x. This particular problem is solved therefore.
Of course, there’s then still the problem of making money out of making adapted golf carts but at least one problem is indeed solved.
