Business process automation company Exela Technologies, Inc. (NASDAQ: XELA) recently revealed that the company’s Board of Directors has approved a 1-for-20 reverse stock split of its stock.
Shares of the company did not react kindly to the news as it plummeted by more than 30% to close at $0.10 in yesterday’s extended trade.
Why the Reverse Stock Split?
Exela’s stock has been down almost 100% in the past year. To arrest this decline and improve the marketability and liquidity of the stock, the company has decided to opt for this reverse stock split.
The shares will begin trading on the Nasdaq Capital Market on July 26, 2022, on a split-adjusted basis. Post the reverse stock split, there will be about 64.8 million shares of Exela common stock outstanding.
The company is slated to report its earnings on August 11, 2022.
Wall Street’s Take
Overall, the Wall Street community is cautiously optimistic about the stock with a Moderate Buy consensus rating based on one Buy and one Hold. The XELA average price target of $1.18 implies the stock has upside potential of a whopping 711% from current levels. Shares have declined 94.1% over the past year.
Hedge Funds Remain on the Fence
Overall, the TipRanks’ Hedge Fund Trading Activity tool shows that hedge fund confidence in XELA is currently Neutral. Moreover, the cumulative change in holdings across the single hedge fund that was active in the last quarter was a decrease of 475,000 shares.
Final Thoughts
Exela has been continuously reporting losses over recent quarters. As a consequence, the stock has been declining too. Although this reverse stock split can provide some support to the stock price, it is likely to be short-lived as the company should seek strategies that can improve its fundamentals.
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