Electric vehicle (EV) startup Ideanomics (NASDAQ:IDEX) has undergone a 1-for-125 reverse stock split today. Consequently, IDEX stock is trending on social media, while the shares’ real value is sinking 11% after tumbling 10% yesterday.

With reverse splits, companies sharply lower the number of their shares outstanding, causing the price of each share to surge. Shareholders consequently own many fewer shares, but each of the units is worth much more.

More About the IDEX Stock Split

Ideanomics explained that it was carrying out the reverse split “primarily” in order to comply with a Nasdaq rule that requires a minimum bid of $1 for every stock listed on the exchange.

In recent months, the Street has become quite bearish on stocks that undergo reverse splits, and firms that undertake them have attracted many short sellers.

The bears believe that firms that carry out reverse splits are performing poorly. As a result, they expect the companies’ share prices to fall sharply in the future.

More About Ideanomics

The company sells and leases electric vehicles to companies. It also provides EV charging solutions and financing options to firms that buy EVs.

Last year, the company’s revenue came in at $100.5 million, and it reported a gross loss of $800,000, along with an operating loss of $159.6 million.

As of the end of the first quarter, it had only $18.9 million of cash and total current liabilities of $128.1 million. Given this data, the company may be at high risk of going bankrupt in the not-too-distant future.

So far in 2023, the shares have tumbled 79%, and they have sunk 94% in the last 12 months.

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.