Praxis Precision Medical (NASDAQ: PRAX) stock should rise 1,500% today. This 15x jump in PRAX stock is not the heralding of some new dawn in Parkinson’s treatment - rather, it’s a purely technical move to solve an imminent technical problem. It’s also not a change in the real stock price, it’s a change in the nominal one. There might be some second order effects but the first order is going to fatten, or drain, no wallets.
The business line: “Praxis Precision Medicines, Inc., a clinical-stage biopharmaceutical company, develops therapies for central nervous system disorders characterized by neuronal excitation-inhibition imbalance. It is developing ulixacaltamide, a small molecule inhibitor of T-type calcium channels that is in Phase IIb clinical trial for the treatment of essential tremor, as well as in Phase II clinical trial to treat Parkinson’s disease; PRAX-562 for the treatment of pediatric patients with developmental and epileptic encephalopathies (DEE); and PRAX-628 to treat focal epilepsy.”
There was a run up in the stock earlier in the year over that tremor treatment but that then, essentially, failed a testing stage. “Praxis Precision Medicines isn’t letting a midphase fail stand in the way of its plans in essential tremor. While its selective T-type calcium channel blocker failed to beat placebo on the primary endpoint, Praxis zeroed in on secondary measures and post hoc analyses to make the case for further development. Investors didn't seem quite as confident, however, sending the biotech's stock plunging 47% to $1.53 per share in premarket trading from a Thursday closing price of $2.92.”
Praxis Precision Medicines stock price from Google Finance
This now leaves Praxis with a potential problem. To remain on Nasdaq it must meet the $1 minimum bid price. It’s in danger of not doing that. So, something is to be done. That something is to simply state that 15 old shares are now one new one - a one for 15 reverse stock split: “Praxis Precision Medicines, Inc. (PRAX) will effect a one-for-fifteen (1-15) reverse split of its Common Stock. The reverse stock split will become effective on Wednesday, November 29, 2023.”
This doesn’t change the market capitalisation, just the number of shares that make it up. Therefore the stock price reacts mechanically, up 1,500%, or 15x. Which solves that problem of approaching the $1 minimum bid price. It doesn’t, of course, solve the problem of making the drugs work but perhaps that’s something they will now be able to work upon?
