Today’s price action in NeuroBo (NASDAQ:NRBO) is quite remarkable, to say the least. While many stocks in the market are up today, few have seen triple-digit increases like this clinical-stage biotech company. At the time of writing, NRBO stock is up more than 125% following an announced reverse stock split.
This reverse split will see NeuroBo issue 1 share for every 30 shares investors hold. By effectively reducing its share count, NeuroBo can increase its share price mathematically and keep its Nasdaq listing, which the company was at risk of losing.
Various listing requirements from the Nasdaq and other exchanges stipulate a stock price of more than $1 is needed to allow for trading on a given exchange. For penny stocks such as NRBO, which dipped toward the 25-cent range recently, reverse stock splits are necessary to allow for future capital raises and efficient trading.
Let’s dive into what investors may want to make of this move, and discuss what NeuroBo is all about.
Why Is NRBO Stock Soaring Today?
NeuroBo is certainly a company many may not have heard of. With a market capitalization of less than $17 million after today’s impressive increase, NRBO stock could certainly be put in the “penny stock” bucket.
Along with the increased risk, such stocks bring comes outsized upside potential. Today’s rally is evidence of just how quickly such stocks can move.
Now, NeuroBo’s core business model, which involves studying prospective therapies for neurodegenerative, infectious and cardiometabolic diseases, is notable. This is a clinical-stage biotech company with an altruistic aim. Of course, bringing said products to market is easier said than done, and the company has a long path forward to doing so. That said, the ability to raise money via capital markets (which requires maintaining a listing) is very important for such stocks.
While reverse stock splits are generally viewed through a negative lens, as companies don’t do these unless they need to, in the case of NRBO stock, such a move appears to be necessary. For investors who have been waiting for the news of this split, enthusiasm may be due. However, this is a stock that remains far too speculative for my blood. Accordingly, those interested in NeuroBo as a momentum play should trade this name with caution right now.
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On the date of publication, Chris MacDonald 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.