Stock splits have long been events that investors watch closely. In a stock split, the number of outstanding shares increases while the price of each share falls by the same ratio. Although the company’s market cap and shareholders’ ownership percentages remain unchanged, the lower share price can make the stock more affordable for individual investors.
Not every company wants a lower share price, though. Some opt for a reverse stock split, combining several existing shares into fewer shares with a higher price. The reverse split also leaves the company’s market cap unchanged, but it can help companies whose stock has fallen close to the point where they risk violating exchange listing standards, including Nasdaq’s minimum bid price requirement. Raising the share price through a reverse split can restore compliance and allow the company to keep its listing.
Neither type of split changes a company’s underlying value, though each can shed light on management’s objectives and the circumstances facing the company.
Here are the upcoming stock splits for the week:
Picard Medical (PMI) – Picard Medical is the parent company of SynCardia Systems, which develops, manufactures, and commercializes the world’s only FDA- and Health Canada-approved total artificial heart. The device temporarily replaces a failing heart in patients with advanced, end-stage heart failure while they wait for a donor heart. However, PMI shares have plunged about 98% over the past year due to heavy dilution from repeated stock and warrant offerings, mounting losses, a going-concern warning, and NYSE American non-compliance notices over stockholders’ equity requirements, despite continued growth in device revenue. On July 21, Picard Medical announced that its board had approved a 1-for-50 reverse stock split of its common stock to support its continued listing on NYSE American. The split took effect on July 31, with shares trading on a split-adjusted basis starting August 3.
