Stock Split is a regular occurrence within the stock market. However, they are much more common among stocks at risk of being delisted from an exchange such as NASDAQ due to minimum bid requirements that revolve around a company’s share price. This led to the rise of doomed stock-split stocks.
There are forward stock splits when a company believes its share price is too inflated, possibly pushing away new investors. Hence, a share dilution occurs when a company offers shareholders more shares, typically at a 2:1 or 4:1 ratio. This action usually results in more investors flocking to the stock.
On the other hand, a reverse stock split is the opposite of a forward stock split in which a company, as mentioned before, is in danger of being delisted from a stock exchange and will perform a stock consolidation in which one share may now become 10 or 15 shares. The reverse stock split is primarily meant to increase a company’s share price due to a smaller number of outstanding shares available, resulting in a company’s continued listing on an exchange such as the NASDAQ.
Organigram Holdings (OGI)
Organigram Holdings (NASDAQ:OGI) produces cannabis and other related products for medicinal and recreational use. It is the parent company of Organigram with operations in multiple Canadian Provinces and Laurentian Organic, acquired by Organigram Holdings back in 2021. The company has a portfolio of brands such as Trailblazer, Holy Mountain, SHRED, Monjour, Edison Cannabis Co., and Tremblant Cannabis.
Over the last year, their stock price has fallen by 57% due to the company’s growing profitability issues, even after unveiling new product lines. In January, Organigram received notice of loss of compliance with the NASDAQ minimum bid price requirement, which is when a stock trades below $ 1$ per share for 30 consecutive days.
On July 6, the company announced the completion of its share consolidation in which they imposed a reverse stock split for a ratio of 1:4. Following its most recent quarterly earnings release in April, its stock price has continued to fall even after a reported 24% increase in net revenue. Within the last few days, the stock has rallied by 25% following the reverse stock spill in anticipation of their third quarter fiscal year 2023 earnings which is expected to be released on July 13.
22nd Century Group (XXII)
22nd Century Group (NASDAQ:XXII) is an agricultural business in Buffalo, New York. The company focuses on reducing harm by altering tobacco plants to produce less nicotine, reducing the amount of cannabinoids in cannabis plants, and implementing hops research, all through genetic engineering.
22nd Century Group’s stock price has fallen off a cliff within the last year, falling by 92%, due to ongoing profitability issues that have plagued the company for some time. In April 2021, their stock reached an all-time high of approximately $77 per share.
On July 3, the company announced a reverse stock split for a ratio of 1:15. The stock split was due to 22nd Century Group wanting to stay in accordance with the NASDAQ’s minimum bid requirement for listing. In their most recent earnings report released in May, the company stated a net loss that doubled year-over-year and total revenue that increased by 143% compared to last year. Still, due to the increased cost of production, the company saw a gross loss of $1.2 million.
Blue Apron (APRN)
Blue Apron (NYSE:APRN) is a direct-to-consumer meal delivery company headquartered in New York, New York. The company also offers a wine and kitchen accessories delivery service.
On June 7, Blue Apron announced the implementation of a reverse stock split for a ratio of 1:12. And a few days later, on June 9, they announced the closing of the transaction with FreshRealm, a meal solutions provider. Under the agreement, FreshRealm will take over the operational infrastructure for Blue Apron allowing them to focus primarily on their direct-to-consumer business model. The deal whips out Blue Apron’s existing debt by providing them with $25 million upfront. Following this news, Blue Apron’s share price rose by 67%.
Even including this large rally in the company stock price recently, they are still down 89% over this last year. They have seen profitability issues that have come along with more competition in the food delivery space. But, it will be interning to see if this recent deal with FreshRealm will bring the stock back into relevancy again.
On the date of publication, Noah Bolton did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.