Lordstown Motors (NASDAQ:RIDE) stock is falling hard on Tuesday after the electric vehicle (EV) company announced a reverse stock split.
The big news traders need to know about is RIDE stock undergoing a 1-for-15 reverse stock split. That will see the company consolidate every 15 shares of RIDE stock into a single share. This will see shares start trading on a split-adjusted basis when markets open on Wednesday.
With this reverse stock split, Lordstown is reducing its total number of outstanding shares and increasing the price of its stock. It is doing so without directly affecting its market capitalization or shareholders’ stakes in the company.
Why a Reverse Stock Split?
Lordstown Motors explained the following about why it’s enacting a reverse stock split:
“The Reverse Stock Split is intended to improve the marketability and liquidity of the Class A common stock. A higher market price can make the Class A common stock more attractive to a broader range of institutional investors, professional investors, and other members of the investing public. In addition, the Reverse Stock Split is intended to increase the per share market price of the Class A common stock in order to satisfy Nasdaq’s $1.00 minimum bid price requirement.”
RIDE stock is sliding 3.9% lower on the reverse split news. This comes as some 4.6 million shares change hands. For comparison, the company’s daily average trading volume is around 5.7 million shares.
Investors looking for more of the most recent stock market news will want to continue reading!
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On the date of publication, William White 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.