MSP Recovery (NASDAQ: LIFW) stock should, in theory, jump 2,500% at the open this morning. A purely technical and nominal price change. However, there’s already been considerable action in LIFW stock over this technical move. So the actual outcome for the real - not nominal - stock price is unknown. We can say what the nominal price should be but where that real price will settle is more difficult.
We’ve talked before about this deal at MSP Recovery: “The specific and detailed problem is that the stock price means there’s a serious risk of being delisted from Nasdaq. The stock value on the OTC would be significantly lower and raising capital would be very much harder. Nasdaq has a $1 minimum bid price requirement.
So, something needs to be done and the normal thing is to have a reverse stock split. Simply announce that some number of old shares are now some smaller number of new stock. The stock price then reacts mechanically by rising by whatever multiple the reverse stock split is.
MSP Recovery has announced that they’re going to do this, that the shareholders have approved it. We don’t know the date nor the ratio as yet but we do know they’re on it. It’s possible that the LIFW stock price rise is relief that the issue is finally being addressed. But we think it more likely that this is a little bit of buying attracting some more - a momentum trade. As we say, the difficulty with those is knowing when it’s all going to stop.”
Now we know the when and the amount.
MSP Recovery stock price from Google Finance
The full announcement: “MSP Recovery, Inc. (LIFW) will effect a one-for-twenty-five (1-25) reverse split of its Class A Common Stock. The reverse stock split will become effective on Friday, October 13, 2023.”
The pricing difficulty here is that the 2,500% rise, or 25x, in LIFW stock is a purely nominal one. But we’ve seen already considerable action in LIFW stock on the announcement that it would happen. That’s fine, not losing the listing probably is value additive. But it also means that it’s difficult to gauge what the real price reaction to it actually happening - rather than the announcement that it will - is going to be. The thing that can be said with confidence at this point is that there’s going to be a 25x change in the nominal MSP Recovery stock price. But what then happens to the real price, well, faites vos jeux….
