The worst possible outcome of THQ’s “reverse stock split” appears to be coming true.
THQ executed a “reverse stock split” in July, converting every ten shares of stock in the company into one, pushing the price up to $5.80 in the process. The move was made to avoid a looming NASDAQ delisting and it worked, but it carried with it a risk of even greater trouble ahead if the stock sunk back down to its pre-split low, because at that point there’d be nothing left to do but burn it, bury it and salt the earth.
Alas, in the wake of a genuinely ugly earnings call and a shocking refusal by the company to provide sales and earnings guidance for FY2013 and beyond, that’s exactly what has happened. THQ’s share price had been sliding since the reverse split but took a gut-sucking nosedive of more than 47 percent this morning to wind up at $1.60 at last check. The company’s market capitalization, a rough measure of its overall value, stood at just north of $42 million at the end of June; it’s now less than $11.6 million.
The trouble for THQ is that the reverse stock split was a dodge, a mechanism for artificially inflating the price without actually changing anything. But it was a purely short-term maneuver that required a seriously impressive follow-up to convince investors that a meaningful turnaround was underway. That didn’t happen, and now the company is in an even worse position, with very few “Plan B” options available.