OceanPal (NASDAQ:OP) stock is trending on social media today and appears to be up 600% in premarket trading, However, the shares are only soaring because the stock’s 1-for-10 reverse stock split became effective today.
OceanPal is a small shipping company based in Athens, Greece.
OP Stock and the Reverse Split
OceanPal’s shareholders approved a 1-for-10 reverse stock split on April 5. In other words, in accordance with my explanation in a previous column, “the owners of [OP stock] agreed to allow the company to exchange one share of its stock for every ten… of its shares outstanding.” And: “Since reverse splits tremendously reduce the number of shares outstanding, the price of each share increases by large amounts in the wake of such a transaction.” However, such splits do not increase the total value of each investor’s shares.
The company, whose shares trade on Nasdaq, is undertaking the reverse split because it had to raise the value of each of its shares to at least $1 in order to comply with Nasdaq’s rules. Nasdaq requires that all of the stocks on its exchange maintain an annual price of at least $1 per share.
More About OceanPal and What Investors Should Watch Going Forward
OceanPal owns four dry bulk ships. The company says that its top executives “have, on average, more than 20 years of operating experience in the shipping industry.”According to OceanPal, it does not currently have any debt.
Last quarter, OP generated $5.1 million in revenue and $403,000 in net income. In the same period a year earlier, the company’s reported a net loss of $8,000. Going forward, investors should check whether OceanPal’s top and bottom lines are rising sequentially and if they continue to increase year-over-year.
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On the date of publication, Larry Ramer 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.