Axcella Health (NASDAQ: AXLA) stock should jump 2,500% at the open. AXLA stock is not going to rise 25x as a part of the unusual price movements we’ve been seeing this past few weeks - this is a purely nominal price change, one designed to solve a particular problem. That problem is how to maintain the Nasdaq listing in the face of a low - nominal - stock price.
Axcella has done well these past few weeks, it’s up 230% over the past month for example. We do think this has been rather overdone, an excess of hope perhaps. For as we’ve said about Axcella Health: “Axcella Health (NASDAQ: AXLA) stock is up 300% yesterday. AXLA stock jumped on the announcement of their receipt of a patent on their long covid treatment. Getting a patent is nice, it sure is. But it’s not in fact, a proof of anything. To get a patent you show that what you’ve got is new, the patent is issued. This does not mean that what you’ve got works. Not in any sense at all does this patent mean that it actually cures or even helps with long covid. There’s still the long slog through the FDA testing process to go. First to prove that it doesn’t not work - ie poison people - then to prove that it does work and finally, only then, can it go on sale. The usual estimate is that it takes 10 years to go through this process.” This also repeated at AXLA: “...up 22% premarket. The AXLA stock price rise is a repeat of that excitement about a patent on their long covid treatment. Patents have a value, sure they do. In fact in drug development they are, in the end, the value. The manufacturing cost of any particular treatment is usually near spit. So, it’s only the patent that protects margins for that approximately 10 years a producer has before generics arrive.”
And then we had this: “....is up 80% or so. AXLA stock moving up is nice for shareholders, of course it is, but we would hope that there’s an actual reason for it. Which is isn’t quite what we find. As far as there is any news it’s simply that the company will sort out the nominal - note, nominal, not real - stock price so as to keep the NASDAQ quote. Which really isn’t something that we think is 80% value additive.”
That we had a 300%, a 20% and an 80% stock price rise and yet the cumulative rise is only 230% shows there’s a lot of falling back between these surges. We think rightly - a patent comes at the beginning of a drug development process, before there’s any proof that it actually works. So while news of a patent is nice it’s really not that value additive.
Axcella Health stock price from Google Finance
The specific today, behind the 2,500% nominal price rise, is the taking effect of that last announcement. Penny stocks cannot stay on Nasdaq. Therefore something must be done. That something is to declare 25 pieces of old stock to be one of new - a one for 25 reverse stock split: “Axcella Health Inc. (AXLA) will effect a one-for-twenty five (1-25) reverse split of its Common Stock. The reverse stock split will become effective on Tuesday, September 19, 2023.”
As this doesn’t change the market capitalisation, only the number of shares that make it up, the stock price should react, mechanically, by rising 2,500%, or 25x.
It’s a part of the plan to get Axcella sorted out, sure it is. We’ll also stick with our prediction that there will be another piece, a capital raise, soon enough. In fact, we’d expect some stock issuance in 3…2…1…
