Electric truck maker shares Nicola (Nasdaq: NKLA) Shares were trading sharply lower Thursday morning, after the company said in a regulatory filing that it would conduct a 1-for-30 reverse stock split next week.
As of 10:30 a.m. ET, Nikola shares were down approximately 23.3% from Wednesday's closing price.
A reverse split for Nikola stock would be more dramatic than expected
The upcoming reverse stock split is no surprise to shareholders, but key details are new. At Nikola's annual meeting on June 5, shareholders approved a proposal allowing Nikola to conduct a reverse stock split of between 1-for-10 and 1-for-30.
The 1-for-30 split, the most aggressive decision allowed under the proposed proposal, was made by Nikola's board of directors last week and disclosed at the Securities and Exchange Commission (SEC). Deposit On Thursday morning.
The division will be effective as soon as the US markets close on June 24, next Monday.
Why is a Nikola reverse stock split not a good sign?
Reverse stock splits Not bullish overall. This is usually done when a company's stock price falls below $1 for an extended period. Nikola stock has not closed at $1 or more since April 9.
Nasdaq It requires publicly listed companies to maintain a minimum share price of $1. If a company's stock price falls below $1 for 30 consecutive trading days, the exchange sends the company formal notice that it has 180 calendar days to return to compliance. If not, it can be written off.
There are two obvious ways for a company to return to compliance: announce news that causes the stock price to rise, or conduct a reverse split.
Nikola's decision to do a reverse split, specifically a 1-for-30 reverse split rather than a 1-for-10 split (or something in between), indicates that the board doesn't see the truck maker's stock price rising anytime soon.
This is in addition to some investor anxiety after the start of electric cars FiskerNikola's bankruptcy filing earlier this week is likely the reason Nikola stock fell sharply today.
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Nikola stock declines Its board of directors has made a grim decision. Originally published by The Motley Fool