Castor Maritime (NASDAQ:CTRM) inventory started Could costing just below $0.50 per share. By the point the month was finished, every Castor Maritime share was promoting for $3.05 per share.
A sixfold improve in share worth in only one month? That will sound like excellent news, but it surely wasn’t. Reality is, Castor Maritime misplaced 38.6% of its worth in Could — and the next chart proves it.
So how did Castor Maritime inventory lose almost 40% of its worth at the same time as its inventory worth went up? Simple. It reverse-split the stock.
Because the identify might counsel, a reverse break up is the other of a stock split. As a substitute of taking one high-price share and slicing it into a number of smaller, cheaper shares, in a reverse break up you are taking a number of low-cost shares and bundle them up into one larger share, with a much bigger price ticket. In Castor Maritime’s case, on Could 28, it bundled up and trade 10 previous shares for one new share in a 1-for-10 reverse break up. However as a substitute of getting that end in a brand new share value 10 occasions the value of an previous share, it resulted in a brand new share value solely six occasions the value of an previous share — as a result of no matter what the value tag says, Castor Maritime misplaced worth.
And it is smart that Castor Maritime inventory would have gone down. In any case, the worth of the Baltic Dry Index (BDI), which tracks the charges that dry bulk shipping companies like Castor can cost for hauling dry bulk items throughout the ocean, declined by 15% within the month of Could. A falling BDI is unhealthy for Castor’s enterprise, as a result of it foreshadows declines within the costs Castor can cost, declines within the revenues that Castor will obtain, and decrease income (and even losses) that Castor will earn.
Now, the excellent news is that whereas the BDI was nonetheless excessive, Castor Maritime managed to briefly flip worthwhile (as proven in its Q1 2021 earnings report released early in June). The unhealthy information, although, is that with the BDI persevering with to fall by way of early June, the possibilities of Castor incomes one other revenue in Q2 2021 worsen by the day.
In the intervening time, Castor Maritime’s inventory break up has its share worth buying and selling again out of penny-stock territory. However until they need to see it buying and selling for pennies once more, traders had higher hope that the BDI improves, and shortly.
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