Shares of Castor Maritime (NASDAQ:CTRM) are down more than 17% in pre-market trading on Monday morning after the global shipping company announced a 1-for-10 reverse stock split, effective on May 28. The drop is set to extend further losses that CTRM stock has suffered over the past 15 sessions.
The move will help Castor meet the minimum $1.00 per share requirement for maintaining the listing of its common shares on the Nasdaq. When the reverse stock split becomes effective, every 10 of the company’s issued and outstanding common shares will be combined into one. Investors should note that this will occur without any change to the par value of $0.001 per share or any shareholder’s ownership percentage of the common shares.
This will reduce the number of outstanding common shares from approximately 899.6 million shares to approximately 90.0 million shares, according to a press release from the Cyprus-based firm.
Earlier this month, Castor Maritime raised $125 million by selling 192 million common shares and warrants. As a result, the company had nearly 900 million shares outstanding, what seemed like an enormous number for a company its size.
Caution Advised on CTRM Stock
Like GameStop (NYSE:GME) shares, CTRM stock has been adopted by retail traders on Reddit for reasons best understood by them. Shares have surged more than 200% during the past six months as investors placed bets that the company would benefit from an economic rebound.
As InvestorPlace contributor Jonathan Berr noted earlier this month, Castor Maritime doesn’t make a profit. In its most recent quarter, the company posted a net loss of $800,000, or 1 cent per share. Revenue grew 57% to $4.4 million after the company doubled its fleet from three ships to six ships. The company also recently announced the purchase of its ninth ship as part of an effort to assemble a 15-vessel fleet. That news sent CTRM stock up more 12% on the day.
While Berr noted that CTRM stock will likely benefit from rising shipping rates and economic recovery from the novel coronavirus, so will larger rivals such as DHT Holdings (NYSE:DHT), Diana Shipping (NYSE:DSX), Frontline (NYSE:FRO) and Navios Maritime (NYSE:NMM).
Both Berr and contributor Mark Hake have been advising caution on the shares. There’s little in today’s news to believe that outlook has changed.
On the date of publication, Robert Lakin did not have (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.
InvestorPlace contributor Robert Lakin is a veteran financial writer and editor, including previous stints with Bloomberg News and as a buyside equity research editor.