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Luminar Technologies (LAZR) saw its stock price drop considerably on Thursday after the company implemented a reverse stock split to prevent potential delisting from the Nasdaq Stock Market.
By 11 a.m. ET, following the adjustment for the split, Luminar’s shares had decreased nearly 10% compared to the previous day’s closing figures.
Understanding Reverse Stock Splits
To remain listed on the Nasdaq, companies must keep their share prices above $1. When a company’s shares fall below this threshold for 30 consecutive trading days, Nasdaq notifies them of non-compliance and gives a 180-day window to rectify the situation.
Firms that receive non-compliance notices, especially those lacking optimism for future gains within the given timeframe, often resort to reverse stock splits. This process consolidates multiple underperforming shares into a single new share, ideally restoring the stock price above the $1 minimum.
Details on Luminar’s Stock Adjustment
After receiving a compliance notice on October 15, Luminar’s shareholders convened on October 30 and approved a reverse stock split in which 15 existing shares were combined into one new share. This adjustment took place after market hours on Wednesday.
The decline in Luminar’s stock price is not surprising given that reverse stock splits initiated to avoid delisting usually signal bearish sentiments. If the company were confident in its prospects for a stock price rebound, it might not have felt the need to execute such a split.
Year-to-date, Luminar’s shares have plummeted approximately 80%, reflecting ongoing challenges the company faces in the marketplace.
John Rosevear has no financial interests in the stocks mentioned. The Motley Fool also has no investments in the mentioned stocks and maintains a disclosure policy.
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