Regis Corp (NYSE: RGS) stock will jump 2,000% today. RGS stock is not leaping 20x because they’ve suddenly worked out how to make haircuts profitable. Rather, there’s one specific technical problem that they can solve. Therefore they’re undertaking the technical move that solves that one and specific problem. This also ends up being, as well as purely technical, an entirely nominal change in the stock price. No wallets will get fattened - nor drained - as a result of this, not directly at least.
The business line is running hairdressers: “Regis Corporation owns and franchises hair care salons in North America. The company operates through two segments, Franchise Salons and Company-Owned Salons. Its salons provide haircutting; styling, including shampooing and conditioning; hair coloring; and other services, as well as sells various hair care and other beauty products. The company also operates accredited cosmetology schools. It operates its salons primarily under the SmartStyle, Supercuts, Cost Cutters, Roosters, First Choice Haircutters, and Magicuts concepts names.”
There was a certain excitement back a year and a bit as it seemed it might be another meme stock. As with so many such ideas it’s now down 75% from the levels it reached then. Buying for the speculative flurry worked, buy and hold did not.
Regis Corp stock price from Google Finance
The specific problem here though is that the NYSE doesn’t allow penny stocks to remain on the market. It’s not that every penny stock is a fraud, it’s that when there is a fraud , a pump and dump, it tends to involve a penny stock. Therefore there’s a minimum $1 bid price requirement. And if you can’t meet it then you can - will eventually - lose the listing. There is a solution, simply declare 20 old shares to be one new one, a one for twenty reverse stock split: “Regis Corporation (NYSE: RGS), a leader in the haircare industry, today announced that it intends to effect a reverse stock split of its outstanding common stock, par value $0.05 per share, at a ratio of one-for-twenty, with an intended market effective date of November 29, 2023.”
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, jumping 2,000% or 20x.
This also doesn’t solve the problem of how to make money out of the business of cutting hair. But it does mean it’ll still be on the NYSE if it ever does manage to do that.
