Key Points
It pulled the lever on a quite unpopular piece of financial engineering.
At least the move will keep it in compliance with listing requirements.
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It’s safe to say that almost no investor likes it when one of their investments pulls off a reverse stock split. For very good reasons, this is generally seen as a desperate attempt to remain in compliance with the minimum share price listing requirements imposed by U.S. exchanges.
So, it wasn’t shocking at all that ChargePoint Holdings (NYSE: CHPT) took a real hit to its stock price largely because of the move — which actually obscured more than one positive news item about the company. According to data compiled by S&P Global Market Intelligence, ChargePoint’s share price fell by more than 22% over the course of the trading week.
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Reversal of fortune
ChargePoint ripped the bandage off on Wednesday, formally splitting its stock at a ratio of 1-for-20. It’s important to note here that no stock split, reverse or otherwise, changes the underlying value of a company. In this case, the drastically reduced number of shares is offset by a higher per-share price.
Image source: Getty Images.
As is typical in these situations, ChargePoint made the split to regain compliance with its market’s minimum price requirement. Specifically, the New York Stock Exchange stipulates an average of at least $1 per share across a 30-day trading period.
The skinny share price is, in many ways, the least of ChargePoint’s roadblocks. The company has struggled with declining revenue growth and continuing bottom-line losses. Meanwhile, electric vehicle (EV) sales growth isn’t as robust as it was in previous years.
Bullish developments
Not all the news for ChargePoint was discouraging during the week. It launched its Safeguard Care program, which it describes as a service that “provides end-to-end reliability monitoring of ChargePoint charging stations.” This should be reassuring to clients and give the company something of an edge over rivals.
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Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
