Shares of Sunesis Pharmaceuticals (NASDAQ: SNSS) are sinking today, down 10.4% as of 11:35 a.m. EDT after falling as much as 19.3% earlier in the session. The decline stemmed from the company’s announcement on Wednesday evening that it planned to conduct a 1-for-10 reverse stock split.
Reverse stock splits don’t negatively impact investors. They just reduce the number of shares held while pumping up the value of each share. So why did the small biotech stock fall today? Well, reverse splits are never a good sign for a company.
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Sunesis had to move forward with this 1-for-10 reverse stock split to regain compliance with Nasdaq‘s $1.00 minimum bid price. The small drugmaker’s shares have been trading below $0.30 for weeks and haven’t topped the $1.00 threshold since March.
The only good news with Sunesis’ latest move is that the alternative would have been much worse. The company would lose access to much-needed capital if its shares were delisted by the Nasdaq stock exchange.
Sunesis announced in July that it planned to review “strategic alternatives to maximize shareholder value.” These alternatives included in-licensing assets, partnerships, and mergers and acquisitions. The company won’t publicly disclose any progress on this front, though. The biotech stock is likely to muddle along at best until Sunesis has news to share.
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Keith Speights has no position in any of the stocks mentioned. The Motley Fool recommends Nasdaq. The Motley Fool has a disclosure policy.
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