The Beachbody Company (NASDAQ: BODY) stock is going to jump 5,000%. A 50x rise in BODY stock could be seen as nice for shareholders but sadly this is a purely nominal rise and for a technical reason only. It’s not a return of some of that capital that’s been lost since that enthusiastic Spac launch connected with lockdown. This is just one of those things, a purely nominal change in the price connected with a single technical move. This isn’t a change in the underlying business case at all.
The business line itself: “The Beachbody Company, Inc. operates as a health and wellness platform that provides fitness, nutrition, and stress-reducing programs in the United States and internationally. The company operates Beachbody on Demand, a digital subscription platform that provides access to a library of live and on-demand fitness and nutrition content; and Beachbody on Demand Interactive (BODi) for live fitness and nutrition….” Clearly a business that would have done well during lockdown - as it did - when physical gyms were closed. Not so well once that physical world opened up again.
The latest results show that little has changed. There’s still very decent turnover, but margins are negative, sales are falling and the market capitalisation in the basement. As is, of course, the stock price.
The Beachbody Company stock price from Google Finance
The technical problem here is that Nasdaq has that $1 minimum bid price rule. The New York markets think that penny stocks are somehow a bad idea. Home of people like the Wolf of Wall Street. So, yu cannot be a penny stock long term and remain on the main markets. This means that if you are a penny stock long term then something has to be done. The answer is simple enough. Just declare that 50 old share are now one shiny new one - a one for fifty reverse stock split: “The Beachbody Company, Inc. (NYSE: BODY) ("BODi" or the "Company"), a leading subscription health and wellness company, today announced that the Company’s board of directors has approved a reverse stock split of all of its issued and outstanding common stock at a ratio of one post-split share for every fifty pre-split shares, effective November 21,2023. The Company’s Class A common stock is expected to begin trading on the split-adjusted basis on the New York Stock Exchange ("NYSE") when the stock markets open on November 22, 2023, under the existing trading symbol "BODY,"”
This doesn’t change the market capitalisation of the company, just the number of shares that make it up. Therefore the stock price reacts mechanically, up 5,000% or 50x. That technical problem with Nasdaq is therefore solved by the nominal price change in the stock. All the other problems remain of course and will continue to determine the real stock price even if the nominal one can be manipulated in this manner.
