PreMarket Prep Stock Of The Day: InspireMD

Benzinga's PreMarket Prep airs every morning from 8-9 a.m. ET. During that fast-paced, highly informative hour, traders and investors tune in to get the major news of the day, the catalysts behind those moves and the corresponding price action for the upcoming session.

On any given day, the show will cover at least 20 stocks determined by co-hosts Joel Elconin and Dennis Dick along with producer Spencer Israel.

When some investors with long positions in InspiredMD Inc. NSPR logged into their accounts on Tuesday morning, some thought they had hit a home run. Other traders that were attempting to exit the issue did not do their homework and got picked off in premarket trading.

Related content: Benzinga's Full Stock Split Calendar

The Company: InspireMD is a U.S.-based medical device company. It's focused on the development and commercialization of proprietary MicroNet stent platform technology for the treatment of complex vascular and coronary disease.

It generates the majority of the revenue from the sales of CGuard EPS which combines MicroNet and a self-expandable nitinol stent in a single device for use in carotid artery applications. The group operates in Germany, Italy, Belarus, Brazil and other countries.

Multiple Reverse Splits: Over the years, InspireMD has undergone a few reverse stock splits, which usually is not a great sign for owning shares. On most occasions, it's a move by the company to boost the share price in order to keep the issue listed on an exchange. It's a type of corporate action that reduces the number of existing shares of stock into fewer, proportionally more valuable, shares.

As a result of reverse-splits, the all-time high in the issue is $214,748, according to the Tradestation platform

Monday’s Price Action: It was just another trading for penny stock as it traded around its average volume in a tight range (0.478 - 0.527) and ended the session at 0.49.

With the reverse stock split going into effect overnight, the issue was no longer a penny stock. With the reduction in shares and increase in share price adjusted the close from Monday was $7.35.

Therefore, investors that were not aware of the corporate action taking place overnight thought their wildest dreams had come true. Many took to Twitter to brag about their newfound fortune.

Those investors who were long the issue and did not have their orders adjusted overnight by their brokerage firm were picked off at the commencement of premarket trading. Stagnant sell orders were lifted a deep discount to the adjusted close as the issue open at $1.92, much lower
then the adjusted close of $7.35.

Tuesday’s Price Action: Believe or not, the unadjusted orders/uninformed investors continued to sell the issue at a discount to the close as the issue did peak until $6.37 in premarket trading. Interestingly the rally continued until it came within a few pennies of the adjusted close ($7.32 vs. $7.35).

Since making that high, it has traded down to $5.91 and rebounded into the mid-$6 handle.