PaxMedica (NASDAQ: PXMD) stock should jump 1,700% this morning. PXMD stock leaping 17x is the result of a purely technical change designed to solve the one specific problem - maintaining the listing on Nasdaq. It’s also a purely nominal price change, no wallets will be filled by this price change. This will also work to solve that specific Nasdaq problem but it won’t deal with anything else that might ail the company.
As to what the business line is: “PaxMedica, Inc., a clinical stage biopharmaceutical company, focuses on the development of anti-purinergic drug therapies (APT) for the treatment of disorders with intractable neurologic symptoms. The company’s lead product candidate is PAX-101, an intravenous formulation of suramin for various indications, including autism spectrum disorder, myalgic encephalomyelitis/chronic fatigue syndrome, long COVID-19 syndrome, and human African trypanosomiasis (HAT).”
A development stage - and pre-revenue - pharma company therefore. There has been that recent excitement about the FDA meeting which we can see in the stock price chart below. But that was rather a flurry of hope and very premature. Which is why it faded back again so quickly.
PaxMedica stock price from Google Finance
Given the pre-revenue status here PaxMedica clearly needs continued access to new capital. Which means being able to keep the Nasdaq listing. But that’s threatened by the cultural prejudice against penny stocks. It’s not that all are fraudulent, but that when there is fraud it tends to be in penny stocks. Therefore the main exchanges insist on a $1 minimum bid price. Fail to maintain that and lose the listing - and also the liquidity and the ability to raise capital.
Thus something must be done. The thing to do is to simply declare that 17 old shares are now one new one, a one for 17 reverse stock split: “PaxMedica, Inc. (PXMD) will effect a one-for-seventeen (1-17) reverse split of its Common Stock. The reverse stock split will become effective on October 31, 2023.” This does not change the market capitalisation of the company, just the number of shares that make it up. Therefore, and mechanically, the stock price changes by 1,700%, or 17x. That specific, Nasdaq listing, problem is therefore solved.
Of course, this still leaves all other business problems still to be solved. But at least the one of them is solved by this simple and mechanical technique.
