Vacasa (NASDAQ: VCSA) stock should rise 2,000% at the open. A 20x rise in VCSA stock is not, however, a signal that the company has turned the corner. It’s the solution to the one specific problem this change is aimed at solving. Which is good, in that limited sense - the one problem gets solved. But that does leave the more general set of problems out there that still need solving. That general set being that yes, there’s a business here. But it’s just not large enough - the revenues are not growing into covering the cost base.
As to what’s done at Vacasa: “Vacasa, Inc. operates vacation rental management platform in North America, Belize, and Costa Rica. The company enables guests to search, discover, and book its properties on Vacasa.com and the Vacasa Guest App. It also provides services to buy and sell vacation homes through its network of real estate agents. The company was founded in 2009 and is headquartered in Portland, Oregon” So, sorta a junior version of AirBnB if we want to think of it that way.
The more general set of problems is as above. They came to market via a Spac deal and as with many of that vintage the stock hasn’t done - to put it politely - well. They do have revenue, there is a real business here. But those revenues aren’t enough to cover the cost base. The company needs significant growth - or a significant cut in that cost base - to become generally profitable. Which is what has led to the particular problem being solved today.
Stock markets have their fashions and cultures and on the New York markets this includes the idea that penny stocks are not, somehow, quite respectable. This means be a penny stock for long enough - usually 18 months- and you’ll be kicked off the main markets, Nasdaq and the NYSE. This is clearly a risk that Vacasa is running.
There is a solution to this. Simply declare that 20 old shares are now one new one - a one for 20 reverse stock split: “Vacasa, Inc. (VCSA) will effect a one-for-twenty (1-20) reverse split of its Class A Common Stock. The reverse stock split will become effective on Tuesday, October 3, 2023” This doesn;t change the market capitalisation of the company - not directly it doesn’t. It just changes the number of shares that make it up. The price of each individual piece of stock therefore reacts mechanically - up 2,000% or 20x.
And that’s it - the listing problem, meeting the Nasdaq $1 minimum bid price, is solved. This still leaves all those other problems about the actual business itself to be dealt with of course.
