After a summer of stock splits, one company has opted for the opposite course of action. So far, it’s paying off. Workforce technology platform ShiftPixy (NASDAQ:PIXY) asked shareholders to vote on a reverse stock split on July 19 and investors voted in favor of the one-for-one hundred reverse split proposal. Now, PIXY stock is trading on a reverse split basis.
Since markets opened, PIXY has surged more than 100% at one point, although with some volatility. Still, after a month of trading at less than 50 cents per share, the stock is now at a price of more than $20 as of this writing. Its gains for the past month have surpassed 10,000%.
As impressive as today’s performance is, gains of that magnitude tend to stabilize. PIXY stock is known for eye-catching surges. Back in May, shares shot up 185% after the company announced a special share distribution plan for investors. However, ShiftPixy hasn’t demonstrated any sustainable growth since then.
This reverse stock split is clearly the company’s attempt to breathe new life into shares. But will it be enough to help ShiftPixy take flight? Let’s take a closer look at what investors can expect.
What It Means for PIXY Stock
Before diving into today’s news, it’s important to note one thing; this isn’t ShiftPixy’s first reverse stock split. The company enacted a 40-for-1 reverse split in late December 2019. This resulted in PIXY stock surging in the month that followed, although it started losing momentum shortly after. Since this early 2020 bump, shares have trended steadily downward. Even as the pandemic accelerated the gig economy, ShiftPixy proved unable to ride the wave.
It makes sense that ShiftPixy is seizing the opportunity to implement one of the few things that has worked for it in the past. Under a reverse stock split, an investor’s holdings do diminish in terms of the number of shares, but the stock often rises in value. “Per-share price bumping is the primary reason why companies opt for reverse stock splits,” according to Investopedia.
But that isn’t the only reason ShiftPixy may be opting for the split. Just as a stock split can make a stock more appealing to retail traders, a reverse split can make shares more appealing to institutional investors who only buy stocks above a certain price point. An influx of large-scale investments can send a stock soaring. And if prominent hedge funds start taking an interest in PIXY stock now, it has the potential to keep moving upward.
However, this raises a question: what else can ShiftPixy offer investors? After all, a stock that has shed more than 80% of its value over the past five years — hitting penny stock status — doesn’t quite fit the criteria of most hedge funds. That is, unless funds have significant reason to believe PIXY stock will surge again.
As InvestorPlace contributor David Moadel reported in February, ShiftPixy is focused on growth. The company has expanded its business model by venturing into food service and delivery and the non-fungible token (NFT) space. These haven’t been significant growth catalysts throughout 2022, but they are still worth watching as ShiftPixy prepares to turn a corner. If a few large-scale investors are willing to bet on shares, PIXY stock could become an unlikely winner in late 2022.
On the date of publication, Samuel O’Brient did not hold (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.