Key points:
- Athersys is up 2,752% this morning premarket
- That's a purely nominal rise of course, not a real one
- The real price change is maybe 12% up, or 10% down, our choice of reference
Athersys (NASDAQ: ATHX) stock is listed as being up 2,753% on the ticker this morning. That's a welcome relief from the 91% down over the past year and of course it entirely eclipses that loss. Except we can – and should – also note that in reality Athersys is only up 12% this morning and that's not enough to cover the 25% fall in Friday. So, all in all, ATHX is down over the past couple of days trading – and woefully, horribly, down over the past year.
As to what Athersys does it's a biotech company working on regenerative medicine. Sadly, no, this isn't like lizards growing a new tail for the science here simply isn't that advanced. Rather, the lead candidate is in Phase III trials and is aimed at regaining nerve function after ischaemic strokes. Yes, we would like this to be developed, yes, it would be likely highly profitable if it gains FDA approval and gets out there into the market.
But as we know this stage of biotech research simply eats capital. It doesn't help that the last set of results on that stroke treatment led to 70% of the workforce being laid off. Revenue is running at $2 million and change a year, costs at $24 million a year and that's all – obviously – covered by eating capital. And that requirement for continued capital is why the 2,752% price rise this morning. Almost all of that is a purely nominal figure, to allow for continued membership of NASDAQ and so allow more capital to be raised – maybe.
Also Read: Five Best Pharmaceutical Stocks to Watch in 2022
So, what is all of this then? In reality it's just fashion, culture possibly. New York markets think that a good and dependable stock should be in the $10 to $100 range. Anything below that is a bit racy. And anything below a $ is a penny stock – penny stocks being where all the stock manipulators and so on hang out. So, stocks priced in pennies can't be on the major exchanges, the NYSE, NASDAQ and so on. That this is all fashion we can prove as the same dependable price range in London is £1 to £10. This is why ADRS of London stocks are usually 10 pieces of the London stock – to be in the fashionable range in both markets.
But that 91% decline in the Athersys stock price has brought it down to pennies – 13 pennies at close Friday, or $0.13. Which means that the NASAQ quote could be lost, relegation to the OTC markets looms. The problem with that is that Athersys still needs – OK, would like – to be able to raise capital which means wanting to be on the more liquid market – NASDAQ.
Thus we have a purely nominal change in price because what used to be 25 shares, on Friday, is now 1 share, on Monday. A reverse stock split, a consolidation to Brits (and maybe Canadians). That should lead to a 2,500% rise in the Athersys stock price at open today but the actual rise so far, premarket, has been that 2,752%. Which is about 12% up in real terms on that Friday close. Which gets more complex as Athersys dropped 25% on Friday, meaning we're still well below Friday's open.
The actual lesson here is that nominal and real prices are not the same things. A 2,752% nominal price rise can be seen as a 12% real price rise over a few trading hours, or a 10% or so real loss over 24 trading hours but the one thing is absolutely isn't is a 2,750% rise in any actual holding of Athersys stock.