CASI Pharmaceuticals (NASDAQ:CASI) stock rocketed higher in pre-market trading this morning, but it’s not due to any positive news from the biopharmaceutical company.
Instead, the rise in price for CASI stock comes from a 1-for-10 reverse stock split that went into effect after markets closed on Wednesday. A reverse stock split sees a company consolidating shares of its stock to increase the price.
A reverse stock split doesn’t directly affect a shareholder’s stake or the company’s market capitalization. However, we often see shares dip on a reverse stock split announcement, as well as after it’s gone into effect. That’s happening today, with CASI stock heading lower in normal trading hours today.
So why did CASI Pharmaceuticals go through with a reverse stock split? The company didn’t have much of a choice, as it needed to quickly increase the price of its shares. If it didn’t, it couldn’t have maintained the minimum bid price to remain listed on the Nasdaq under its Capital Market tier.
Wei-Wu He, Ph.D., chairman and CEO of CASI Pharmaceuticals, said this about the reverse stock split.
“By implementing a reverse stock split, the Company is better positioned to regain compliance with the NASDAQ listing rules. Maintaining our listing on NASDAQ will provide the Company with greater flexibility with respect to access to the capital markets.”
CASI stock is down 19.3% as of Thursday morning.
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On the date of publication, William White 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.