Shares of Blue Apron (NYSE:APRN) are trending on the day, as some investors see APRN stock higher by more than 800%. Unfortunately, though, that’s not the case.
Many people may have forgotten about Blue Apron, but its supposedly big gains on the day are misleading. Unfortunately, shares are not up ninefold on Thursday. Instead, the stock is actually down about 10% on June 8. At the low, shares were down 22%. And in the last two days, the stock has lost more than one-third of its value.
Causing the issue is a 1-for-12 reverse stock split.
A reverse stock split is often viewed as a positive catalyst by short-term momentum traders. Regardless, it does not point to a healthy situation. Reverse stock splits are often used as a means to meet exchange requirements for a minimum stock price.
While technically possible to have a low stock price with healthy fundamentals, stocks that revert to this tactic are often accompanied with struggling businesses.
Stock splits and reverse stock splits are simple arithmetic. It involves alternating the number of shares available, which then alters the price of the stock. 10 shares at $100 each equals $1,000, just as 20 shares and $50 apiece equals $1,000.
With that in mind, nothing is fundamentally different with APRN stock than it was a day ago. The only difference is the price and available shares.
What to Make of APRN Stock Now
Many investors have likely forgotten about APRN stock. Shares burst onto the scene in June 2017 and have garnered an infamous history.
By October, the company announced a realignment. In November, the company changed CEOs. In mid-November, the stock was down more than 70% from the initial public offering (IPO) price just a few months prior. By early April — less than a year after it went public — shares were down more than 84%.
Shares soared when the Covid-19 pandemic hit, but the gains were short-lived. The stock tumbled more than 80% from its highs in just over a month and are currently down more than 98% from the 2020 high.
According to the press release, “Once effective, the reverse stock split will reduce the number of shares of Class A common stock issued and outstanding from approximately 76 million to approximately 6 million.”
Worth noting is that APRN stock also hit a 52-week and all-time low in Thursday’s session. Bottoming at $4.91 today, bulls will look to keep the stock elevated off that level. However, the trend couldn’t be anymore clear.
On the date of publication, Bret Kenwell 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.