MSP Recovery (NASDAQ: LIFW) stock rose 540% at one point yesterday. It also then fell back some 50% from that position. It’s the second price move that looks the more reasonable between the pair of them.
Now, if we look in the standard sorts of places we’ll see that LIFW stock is valued at $1.3 billion (Google Finance) or $8 billion (Seeking Alpha) or $1.4 billion (NASDAQ). All of these are entirely and wholly wrong. Out by orders of magnitude. LifeWallet turnover was $2.5 million (yes, m, million) last quarter with a loss per share of minus 7 cents. That’s not a company worth billions. So, what’s the problem here?
As we’ve indicated before about MSP Recovery: “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.” “
And as we pointed out about Lifewallet when that was still in the future: “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.”
What’s happening here is that the market capitalisation calculation is still working off the old number of shares, pre-consolidation. But it’s using the new stock price, post-consolidation, as the value. Thus the market capitalisation calculation - and yes, it’s across all three of those platforms, Google, Seeking Alpha and Nasdaq itself - is 25x too high. We can check this by digging another level deeper at Nasdaq: “Total Shares Outstanding (millions) 13”. 13 million shares at $10 a piece (roughly) is $130 million. Not $1.3 billion and most certainly not $8 billion. (Note that the different sites tend to use different starting times for the calculations - some will be listed price, some will be price at start of day etc).
That’s our first point here. That we cannot even trust the information on stock market sites - if something looks horribly wrong then it almost certainly is horribly wrong.
As to the other issue, yesterday’s price rise and fall. There’s nothing interesting from the company at all so we take it to be just one of those flurries of speculation that so afflict microcaps. Yes, we expect this to fade, as it already started to do yesterday.
