Why Alight Stock Withered This Week
Key Points
This will take effect in advance of July trading.
The ratio is 1-for-20.
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Workplace solutions company Alight (NYSE: ALIT) wasn't working well for its investors in the holiday-shortened trading week.
The company formally announced a major financial engineering move, and while that was expected, market players clearly weren't encouraged. Collectively, they reduced the stock's price by almost 12% over the period, according to data compiled by S&P Global Market Intelligence.
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Splitsville
On Thursday morning, Alight announced that it was enacting a 1-for-20 reverse stock split of its class A common stock, a move ratified in a shareholder vote earlier this month. The company said the split should become effective after market close on Tuesday, June 30.
Image source: Getty Images.
It's important to bear in mind that any stock split, forward or reverse, does not change the company's market cap. The only change is the number of shares, with the per-share price adjusting to reflect the new total.
Reverse stock splits are typically undertaken to regain compliance with stock exchange listing requirements, as is the case with Alight. Sure enough, the company cited this as a key reason for its move.
Discouraging developments
A reverse stock split is a flashing red emergency signal that a business is struggling. Alight's recent performance has been dispiriting, and I'm not seeing any notable signs of improvement yet. I'd stay away from this stock for now.
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Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
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