It’s been an interesting day, to say the least. Investors of Ra Medical Systems (NYSEAMERICAN:RMED) were exposed to massive volatility this morning. RMED stock jumped and then pulled back today, undoubtedly because three proposals were approved by Ra Medical Systems shareholders yesterday. Moreover, one of these proposals involves a reverse share split.
Headquartered in California, Ra Medical Systems is a tiny company with a market capitalization of around $8 million. It shouldn’t be too surprising, then, that Ra Medical Systems shares are low-priced and prone to huge moves sometimes.
In a nutshell, Ra Medical Systems is a medical device company. Its primary products are an excimer laser and a single-use catheter system. Yesterday’s shareholder meeting was a significant event for the company. The stockholders voted in favor of three proposals.
Proposal number one “provides for the immediate right for the potential exercise” of certain warrants to occur. Proposal number three basically just grants permission to continue the shareholder meeting if necessary.
It’s proposal number two that’s the focal point of today’s traders, no doubt. Specifically, it grants Ra Medical Systems permission to “effect a reverse stock split of the Company’s common stock that is issued and outstanding or held in treasury at a stock split ratio of between 1-for-20 and 1-for-50.”
What Will Happen to RMED Stock?
So, here’s the breakdown of the potential reverse stock split. According to the press release, it “will reduce the number of shares of Ra Medical’s common stock outstanding from approximately 54,514,828 shares to approximately 1,090,296 shares.”
However, the split “will not change the authorized number of shares of common stock, which will remain at 300,000,000 shares of common stock.” Moreover, the company expects RMED stock to start trading on a split-adjusted basis on Oct. 3.
In response to this news, Ra Medical Systems shares gained 20% soon after the opening bell rang today. However, the stock was only up 3% by 10:30 a.m. Eastern.
Perhaps investors are remembering reverse splits don’t actually alter the value of the stock — only the quantity. Still, nimble traders are free to give RMED stock a try if they can handle the fast and somewhat unpredictable action.
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On the date of publication, David Moadel 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.