Investors in Genius Brands (NASDAQ:GNUS) are weighing two separate news items today. First of all, the company just announced its first children’s series generated by artificial intelligence (AI). On top of that, Genius also enacted a 1-for-10 reverse share split. That second piece of news seems to be prompting a selloff in GNUS stock today.
Based in California, Genius Brands produces content for children, including videos games and streaming content. Since so many technology-related businesses are adopting machine learning nowadays, it was practically inevitable that Genius would jump into the AI fray.
So, it’s not too surprising to hear that Genius is launching a series for children that will be generated by AI. The series is called Kidaverse Fast Facts and will utilize OpenAI’s super-popular chatbot program, ChatGPT. According to the press release, Kidaverse Fast Facts will utilize AI “for scripts, images, voices and animation.”
Since AI and ChatGPT have been red-hot lately, one might assume that traders would be furiously buying GNUS today. But is that what’s actually happening? No.
What’s Happening With GNUS Stock?
In actuality, GNUS stock is dropping more than 20% this morning, heading down toward the $3.50 level. This might seem irrational, but there’s another piece of news to consider right now.
On Friday, Genius disclosed a 1-for-10 reverse split of the company’s common shares. That reverse split took effect this morning, pushing the Genius Brands share price back above the $1 level.
Why is the $1 level so important? Well, the Nasdaq has listing rules which include maintaining a share price of at least $1. Genius Brands acknowledged that the reverse split is “intended to increase the per share trading price of the Company’s common stock” in order to satisfy the Nasdaq’s $1 minimum bid price requirement “for continued listing.”
Thus, today’s traders are probably concerned about what the reverse split means. They may be wondering whether this is an act of desperation for Genius Brands and envision more delisting threats in the future.
Some investors are clearly worried, which has GNUS stock falling. Apparently, announcing an AI connection wasn’t enough to outweigh the delisting concerns surrounding Genius Brands today.
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On the date of publication, David Moadel 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.