NXU (NASDAQ: NXU) stock is up 49% this morning. That NXU should rise as it says that it’s going to solve its ongoing problem with the Nasdaq listing might be fair enough. It’s that a half again rise in the valuation of the company seems excessive here. Especially given the way they’re going to try to solve the problem - with the issuance of more stock. That’s not normally something that does increase a price.
As to the business itself: “Nxu, Inc. manufactures and markets battery cells and packs, megawatt charging stations, and residential and commercial battery energy storage systems in the United States. It offers QCell, a single cell battery solution; Qube battery packs for mobility products, residential and commercial energy storage systems, and charging infrastructure applications;” And so on.
The problem is that it’s not doing very well at this:
NXU share price from Google Finance
This then leads to a problem with Nasdaq. There’s the obvious one there, or not meeting the $1 minimum bid price. As the company points out, that’s easily enough solved with a reverse stock split. That can be done just by saying it will be done then waiting 20 days.
It’s the other part of the problem that is more difficult: “Nxu does not meet Nasdaq's continued listing standards by two different metrics: stockholders' equity ($2,500,000) and minimum bid price ($1.00).” Increasing stockholder’s equity - in the absence of retained profits, on which ha ha ha - means the issuance of more stock. Which means: “Nxu recently announced an offering of 42,666,667 shares of Class A common stock in a public offering on a Form S-1 registration statement Since it has been public for more than a year, Nxu can file a Form S-3 registration statement for an at-the-market facility to sell additional shares of common stock”
Well, OK, so it can issue more stock. At a rough guess we’d be talking about - at current prices - an increase of 25% of the current share count. Which will obviously have an impact on the stock price, meaning more to be issued and so on. What the balance and final price will be is unknown. But it’s unlikely to be positive from here.
Which is what makes this 51% rise this morning so odd. Yes, it would be good to sort out the Nasdaq listing. But doing so by increasing the stock issue isn’t normally thought of as positive for the stock price.
