One of the more intriguing movers in today’s market has to be MSP Recovery (NASDAQ:LIFW). Shares of the health recovery and data analytics company have surged in today’s session. At the time of this writing, LIFW stock is up more than 100% from yesterday’s close.
Today’s move comes on little news. However, taking this surge in context, it’s clear that LIFW stock has been on a downward trend for the entire year. The most recent rally in May was halted by a notice the company received from Nasdaq suggesting the stock could be delisted for noncompliance. Accordingly, a recent announcement that the company will take on a reverse stock split may have contributed to today’s move.
Additionally, a U.S. Securities and Exchange Commission (SEC) filing released yesterday highlights a prospectus for the company to sell up to nearly 4 million shares as well as 755 million warrants. This filing is a supplement to the original prospectus on Aug. 5 and investors appear to like this move.
According to the filing put forward by MSP Recovery, the ratio of the reverse stock split could range between 3-for-1 and 300-for-1. Thus, there’s plenty of room to get LIFW stock — which trades above 20 cents per share at the time of this writing — into compliance.
Let’s dive into what to make of this move and MSP Recovery in general.
Why Is LIFW Stock Surging Today?
MSP Recovery is a rather intriguing stock, on a number of levels. After going public via a reverse merger in May of last year, the stock plunged on reports that the Medicare and Medicaid litigation firm likely didn’t have the fundamentals to support its $32.6 billion valuation at the time. From a special purpose acquisition company (SPAC) merger price of more than $10 per share, the stock has lost roughly 98% of its value.
Indeed, moves like today’s ought to be kept in context. MSP Recovery’s business model is compelling for investors who know just how broken the healthcare system is. However, the company’s growth outlook doesn’t appear to be materializing to the extent many early investors may have expected. And in this market, unprofitable growth stocks continue to get hit hard.
Many of the same post-SPAC merger headwinds that plagued LIFW stock then are still in play today. And while shares have doubled from yesterday, it’s going to take many more double-ups for the stock to even get close to its previous valuation. A reverse split and additional working capital may be great for MSP in the short-term, but there’s a reason LIFW is trading at these levels.
On the date of publication, Chris MacDonald 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.
