Key points:
- The Evoke Pharma stock price is up 1350%
- This is the result of a 21 for 1 reverse stock split
- Plus, perhaps, a little bit of relief at not losing the NASDAQ quote
Evoke Pharma (NASDAQ: EVOK) stock is up 1350% this morning premarket. Relax, it's not quite as exciting as it sounds, this is the result of a reverse stock split, or consolidation as the Brits call it. The net effect here is that in reality, Evoke shares are now worth about what they were on Friday morning. There was a 15% loss that day, the effect of the consolidation is to get them back up to about that level.
Evoke has its problems, of course, otherwise, the process wouldn't be necessary. Evoke is a single product – at present at least – pharma company. That's the Gimoti nasal spray “for the relief of symptoms in adults with acute and recurrent diabetic gastroparesis.” This product is approved for sale and is now on sale. Given the rise in diabetes incidence in the US we might think this should be flying off the shelves.
But there's always a however. Authorisation for sale came in June 2020. As with every pharma company reaching that milestone they were eeking out their capital to reach it. But of course, the ability to actually go out and sell was heavily impacted by coronavirus and associated lockdowns. The necessity is to get out and see, speak to, the treating doctors of those diabetics – this is not a retail drug. That was all of course severely impacted.
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Evoke details that it has enough funds to run until fall 2023 in its most recent results, which is fine. Lockdowns do mean though that the ability to generate sales in any volume has been hampered. There's also the issue of the patents – those aren't extended as a result of lockdowns so there're simply fewer years of exclusivity in which they can try to make their capital investment back. Evoke is in fact worth less as a result, it's not just a cashflow timing issue.
So, the Evoke stock price has been falling. Which leads to this “On December 29, 2021, the Company received a letter from Nasdaq indicating that, for the last thirty consecutive business days, the bid price for our common stock had closed below the minimum $1.00 per share requirement for continued listing on the Nasdaq Capital Market.” Fairly normal if the stock price does that. So, there has to be some method of increasing that Evoke stock price. It would be nice if it were simply because more people bought it on the back of trading results but that's not happening within the necessary time scale.
If the stock price doesn't get back over $1 for 10 days then the market quote could be lost – that would mean a retreat to the OTC markets where lower liquidity would also imply an even lower valuation. At which point enter the reverse stock split. Each share quoted today is 12 of those that were quoted on Friday. That's what a 1 for 12 reverse split, or consolidation, means. It's also true that in theory, the price should rise by 1200%. Add in a little bit for the relief – or confirmation – that the NASDAQ quotation won't be lost, possibly a little bit of a reverse of Friday's fall, and there we are, a 1,350% rise in the Evoke Pharma stock price.
