Reverse Splits Have The Power! - How Combining Reverse Splits With Recycled News Have Been Powering Stocks - An ARCA Biopharma $ABIO Case Study

Companies undergoing reverse splits have certainly gotten traders' attention, especially if that company has news.  The theory goes with a smaller float, there are less available shares to trade, which certainly gets the attention of the many, many small cap chatrooms and retails traders worldwide, who look to jump into the stock and sell it a few minutes later at an inflated price.

A great recent example of this was Camber Energy $CEI which underwent a 20-to-1 reverse split on July 2nd, and then 6 days later announced the closing of a previously announced merger agreement with oil & gas services provider Lineal Star Holdings.  Again, this was a previously announced merger (i.e. the merger was already back in February), but this piece of recycled news sent the stock flying.

Intraday chart of $CEI on merger close announcement day


That's right, the news was already know, this is what traders call recycled news.

A common example of recycled news is when a biotech announces drug results, and then later issues more press releases talking about those same drug results.

We are going to take a look at an example of this with ARCA Biopharma $ABIO.

ARCA Biopharma $ABIO is a biotech with a drug for atrial fibrillation (irregular/fast heart beat) caused by a genetic mutation.  Their drug, Gencaro, had some results from its Phase 2 study GENETIC-AF published in the Journal of American College of Cardiology: Heart Failure on May 1st, which send the stock flying.

Intraday chart of $ABIO on the day drug results were published in JACC


But that's not the whole story.  These results were already very much known.  These Phase 2 results were actually released over a year earlier in February 2018.  The drug's effectiveness did not impress investors and dropped the stock 72% on the day they were published.

So what happened?  Why did the stock rally on this recycled news?

Well, $ABIO had just completed an 18-to-1 reverse split less than one month before its mammoth run on April 4th.  So we can speculate that a combination of this reverse split + recycled news caused the stock to rocket.

What do you think, dear reader?  Are you convinced that a reverse split + recycled news will continue to rocket stocks in the future?  Leave a comment below.

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