Ideanomics (NASDAQ:IDEX) is down a brutal 25% today on news that the struggling electric vehicle (EV) company will initiate a 1-for-125 reverse stock split as part of an effort to avoid delisting. Indeed, IDEX stock currently trades for a little less than 4 cents per share, well below Nasdaq’s $1 minimum bid price.
What do you need to know about Ideanomics’ latest hair-raising compliance effort?
Well, in a press briefing this morning, the New York-based company announced that its Board of Directors had approved the sizable stock split. A 1-for-125 reverse stock split essentially means that every 125 IDEX shares will be consolidated into individual shares. This will accomplish a few important things for the company. Chiefly, the consolidation of shares will artificially raise the company’s share price. The post-split IDEX stock will be worth the equivalent of 125 current shares.
It’s worth pointing out, however, that while IDEX’s price will technically go up, it won’t represent a net gain for investors in terms of the par value of the stock.
Following the split — which is set for Aug. 25 — the number of IDEX shares in the market will be reduced from 1.5 billion to 12 million.
IDEX Stock Sinks on Reverse Stock Split Announcement
Clearly, today’s reverse-split announcement is ringing sour to investors, potentially for good reason. The move represents a last-ditch effort to regain compliance with Nasdaq’s minimum bid rule and reflects a certain amount of desperation from the company. Indeed, it’s a sort of admission that the stock is unlikely to regain the $1 minimum absent of such an extreme maneuver.
IDEX stock is down 75% so far this year as one of few major losers of this year’s bull market. For context, the S&P 500 and Nasdaq Composite are respectively up 15% and 32% year-to-date (YTD).
Today’s announcement comes as a direct follow-up to a non-compliance notice the company received from Nasdaq just last week.
It’s unclear what’s next for this commercial EV company. That said, at least it’s continued presence as a publicly traded security lends IDEX the potential for a meme rally akin to the likes of Bed Bath & Beyond (OTCMKTS:BBBYQ) and GameStop (NYSE:GME).
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On the date of publication, Shrey Dua 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.
