The stock of Canopy Growth (WEED) has fallen 20% on news that the Canadian cannabis producer is executing a reverse stock split.
The company plans to consolidate its shares on a one-for-10 basis on Dec. 15, with the revised stock price expected to start trading on the Toronto Stock Exchange and Nasdaq indices on Dec. 20.
Reverse stock splits are the opposite of regular stock splits. Rather than reduce the share price, they raise it by consolidating the stock.
Reverse stock splits are seen by markets as an act of desperation by companies that are trying to artificially boost their share price, often to avoid being delisted from an exchange.
In the case of Canopy Growth, the Smiths Falls, Ontario-based company is in danger of being delisted by the Nasdaq exchange as its share price is currently trading below $1 U.S.
The stock of Canopy Growth traded for more than $60 a share in 2018 when Canada legalized cannabis use nationwide.
Now, Canopy Growth’s stock is trading at just $0.74 per share having fallen 80% in the last 12 months amid speculation that the company will file for bankruptcy protection from its creditors.
