Key points:
- We could say that NeuroBo Pharma stock is up 2,500% premarket
- Or, including yesterday, maybe 5,300% is more accurate?
- Or how about 80%? Which would you prefer?
NeuroBo Pharmaceuticals (NASDAQ: NRBO) stock is listed, on the tickers, as being up 2,582% this morning. Which, if that were all that was happening would actually be a fall in the NRBO stock price. On the other hand, if we look a little more closely we could say that over the last 24 hours NeuroBo is up 5,300%. That would be a real price rise. The truth is that there's a mixture here or a purely nominal price change and a real one. That nominal one is what is influencing the real price as well. Our final determination of the real price change depends upon quite what time period we use. Since the news became known or looking at the arbitrary time periods of during, post- and pre-market?
Certainly, stockholders would hope that NeuroBo would do something about the stock price. It's down 85.75% (before this latest move) over the past year after all. As to what NeuroBo does it's a clinical stage biotech company. They've one covid treatment in stage II/III testing. Another a little less far down the development track for cognitive impairment and so on. This is all just the stage of development that eats capital because that's just how the industry works.
This means that maintaining the NASDAQ listing is important – because if relegated down to the OTC markets then capital is going to be much more difficult to come by. Also, more dilutive of extant stockholders if it is available. Which is a problem and the one that NRBO is trying to solve here.
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The problem being American custom – or fashion if you prefer. There's just a general idea that penny stocks are where the unscrupulous play with investors. So, if that is so – and London doesn't share this idea at all – then you cannot, if your stock price is below $1, remain on the main markets like NASDAQ or the NYSE. You've got to do something about it. One option is to turn the business around so that the stock price rises of course.
Another is a reverse stock split. Here, NeuroBo has simply declared that what were 30 shares yesterday are now one piece of stock today. This is a purely nominal price change. It should not, just and on its own, change the market capitalisation of NeuroBo, nor the value of any holding of NRBO. The price change should be 3,000% but again, that's the purely nominal one.
This obviously isn't what has happened though. If we look purely at overnight then the price change has been that 2,500% and change (it's varying even as this is typed). That means the nominal change has led to a fall in the real price – by the amount that it falls short of the in theory 3,000% change. But if we look back past closing yesterday we see that NRBO rose 100% yesterday, after the announcement. So, the total price rise is perhaps 5,300%. Which the perceptive will note is higher than 3,000%.
There has been a real price rise for NeuroBo of – by eyeball – some 80%. That's presumably the value being put on continued access to the capital markets by preserving that NASDAQ listing.
