Shares of the LM Funding America, Inc. (LMFA) stock have been on a skywalk after the announcement of the 1-for-5 reverse stock split by LM Funding America. LMFA stock price saw a surge of 409.75% to reach $3.87 a share at the time of this writing. LMFA stock was red in the previous trading session and went down by 24.83% at closing. Let’s deep dive to explore more of it.
LM Funding America, Inc. (LMFA) is operating as a specialty finance company via its subsidiary LM Funding LLC and provides funds to the non-community associations in many states. LMFA stock yesterday announced a 1-for-5 reverse stock split of its outstanding common stock effective as of May 7, 2021, pursuant to which LMFA stock will be traded on a split-adjusted basis.
According to this reverse stock split, every issued 5 shares of LMFA and outstanding common stock will convert automatically into one share of the common stock and no fractional shares will be issued. Each stockholder will get the cash payment of product subjective to the closing price of LMFA’s common stock on May 6, 2021, as well as the amount of fractional share.
LM Funding board of directors considered the reverse stock split is in the best interest of LMFA shareholders to raise the per-share price of LMFA stock in order to ensure its compliance with Nasdaq’s rule of minimum $1.00 bid price requirement. Moreover, this act will attract a broader range of institutional and other investors.
On April 26, 2021, LMFA stock did announce its digital asset strategy for the purchasing of up to $2 million in digital assets which include Bitcoin, Ether, and other digital assets that are not securities. The purpose of this purchase, which covered 10% of assets of the LMFA stock was to provide an alternative to storing the value in cash and cash equivalents along with paving a way for a variety of transactions by the use of emerging blockchain technology.
The effectiveness of the reverse stock split from today is the obvious reason for the rising LMFA stock price in the pre-market today. Management is putting all its effort to strengthen the LMFA stock. From an investment perspective, it is better to analyze the LMFA fundamentals, balance sheet, and future growth before adding this stock to the portfolio.