TOP Ships (TOPS) Stock Tumbles On Reverse Split

TOP Ships TOPS Stock News

TOP Ships Inc (NASDAQ: TOPS) is having a rough start to the day today. However, many are seeing it as a good day with the stock trading over $6 per share. Nonetheless, the perceived gain is the result of a reverse split and the stock is actually down more than 6%. Here’s what’s going on:

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TOPS Stock Falls On Reverse Split

While TOP Ships hasn’t released any news today, news issued yesterday seems to be resulting in declines. In a press release, the company announced that it would be moving forward with a 1-for-20 reverse stock split of its common shares. The move was approved by shareholders on August 7, 2019.

In the release, TOPS said that it would not be issuing fractional shares as part of the split. Instead, the company will be providing cash payments for fractional shares.

So, why is the stock down if the move is purely cosmetic? Well, it has to do with why the company had to move forward with a reverse split in the first place.

TOPS has been trading under $1 per share for an extended period of time. This creates a bit of an issue. First and foremost, the NASDAQ requires that listed companies maintain a minimum bid price of $1.00 per share. With such a low price, TOP Ships was in danger of being delisted.

Moreover, larger investors tend to shy away from stocks that trade under a dollar per share. In many cases, they shy away from stocks trading under $3 or $4 per share. So, a low price is never a good thing.

With no other option that would bring the stock over the $1 per share threshold, the company moved into a reverse split, creating some concerns.

The Silver Lining

While a reverse split will just about always lead to declines, there is a silver lining here. The truth of the matter is that the reverse split brought TOPS stock over $6 per share. Not only will this meet the NASDAQ’s minimum bid price requirement, it will also likely make the stock more appealing to more investors.

So, while the reverse split is concerning to investors, it will also lead to continued liquidity and likely higher levels of interest.

It’s also worth mentioning that the CUSIP number for the stock is changing. While naked shorts are illegal in the United States, many believe that naked shorts by foreign investors are driving the price of the stock further down. If this is the case, these investors will be forced to cover, likely providing further support.

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