Spruce Power Holding (NYSE: SPRU) stock should rise 800% at the open today. This 8x rise in SPRU stock is not because they’ve just found out a new way to make residential solar profitable. It’s a purely technical change. It’s also a purely nominal stock price change, not a real one. The aim is to solve one specific technical problem and it’ll do that - and only that - just fine.
As to what is done at Spruce Power: “Spruce Power Holding Corporation owns and operates distributed solar energy assets in the United States. The company provides subscription-based services for homeowners and small businesses to own and maintain rooftop solar and battery storage. It offers its subscription-based services to approximately 72,000 customers.” Well, OK, we can imagine that as being a nicely profitable little business, also imagine that it doesn’t meet that standard.
But the problem being solved here is a technical one, not a business one.
Spruce Power Holding stock price from Google Finance
The specific problem is that the NYSE doesn’t like penny stocks. Partly a cultural thing, they just think there’s a right range for stock prices and if you’re not in that range then you can’t be on the market. This is also fairly easy to deal with, simply declare that 8 old shares are now one new one - a one for eight reverse stock split: “ Spruce Power Holding Corporation announced that its stockholders have approved a 1-for-8 reverse stock split of the company’s common stock….The Reverse Split is expected to become effective on October 6, 2023, and the company’s common stock will begin trading on a split-adjusted basis when the market opens on October 9, 2023”.
This doesn’t change the market capitalisation of the company, just changes the number of shares that make it up. Therefore the stock price reacts mechanically - up 800% or 8x. That then takes that SPRU stock price well above the NYSE’s $1 minimum bid price and the problem is solved.
Well, that problem is solved at least. Retailing and leasing residential solar systems, that might still need some work, but the basic stock market problem is solved. Well, that stock market problem is solved, there might be others.
