Tantech (NASDAQ:TANH) stock is down a shocking 70% today after the company announced it is issuing more shares just as it regained compliance with the Nasdaq over its minimum trading price.
Investors are reacting badly to news of the share sale, which they see as diluting their existing holdings and pushing TANH stock sharply lower today.
This is bad news for Tantech. Over the last six months, Tantech’s share price has now declined more than 90%. Shares closed out March 14 at $1.82. Today, they are trading for less than 50 cents.
What Happened With TANH Stock
In a news release, Tantech said that it has regained the minimum trading price requirements to remain listed on the Nasdaq in the U.S. Ordinarily, this would be greeted positively by investors. However, Tantech also said that it is planning a secondary share offering, the proceeds of which it plans to use for general corporate purposes, including working capital and other business opportunities.
Tantech has since announced that it intends to raise $10 million through offering 20 million new shares. Investors tend to view secondary offerings negatively as they will dilute the current shares outstanding. Secondary share sales also raise questions about why the companies involved need more capital.
Why It Matters
Tantech, which produces bamboo charcoal-based products, has been on a rocky road. TANH stock has cratered in recent months and is a penny stock that has been in danger of being delisted from the Nasdaq. In February, the company undertook a 1-for-10 reverse stock split to raise its share price.
Today’s 70% decline comes as the majority of other Chinese stocks are rallying after the government in Beijing pledged its support of capital markets and called for an end to the ongoing crackdown on technology companies. That Tantech’s share price is plummeting when most other Chinese securities are rallying is cause for concern.
What’s Next for Tantech
The drama surrounding TANH stock shows no signs of ending soon. Today’s big decline adds to the ongoing problems facing the company and its shareholders. Investors should avoid this company and its stock.
On Penny Stocks and Low-Volume Stocks: With only the rarest exceptions, InvestorPlace does not publish commentary about companies that have a market cap of less than $100 million or trade less than 100,000 shares each day. That’s because these “penny stocks” are frequently the playground for scam artists and market manipulators. If we ever do publish commentary on a low-volume stock that may be affected by our commentary, we demand that InvestorPlace.com’s writers disclose this fact and warn readers of the risks.
Read More: Penny Stocks — How to Profit Without Getting Scammed
On the date of publication, Joel Baglole 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.
