New Oriental Education and Technology Group (NYSE:EDU) stock was rocketing an obscene amount higher on Friday but it’s not due to strong performance from the company.
Instead, the massive jump in price for EDU stock comes from an American Depositary Shares ratio change. This alters the price of the stock in a similar way to a reverse stock split. That’s to say that the price increases because multiple shares are consolidated down into one.
In the case of the EDU stock ADS ratio change, the company went from a 1-to-1 ratio for its stock to a 1-to-10 ratio. The company originally announced its plan to undergo an ADS ratio change near the end of March.
There are a few different reasons that companies undergo ADS ratio changes or reverse stock splits. In some cases, it’s to keep their stock from being delisted due to the low price. Others do it to help prevent volatility as a higher price helps ward off retail traders.
New Oriental Education and Technology Group doesn’t say exactly why it put the ADS ratio change in place. It could have been for either of those reasons as the company’s stock was trading just above the $1 mark prior to the change. EDU stock is listed on the New York Stock Exchange, which requires shares to maintain a price of at least $1 to remain on the exchange.
EDU stock is slipping 6.9% as of Friday morning following its massive rise in pre-market trading this morning.
Investors seeking more stock market news for today will want to keep reading!
InvestorPlace has all the latest stock news that traders need to know about for Friday. That includes Aterian (NASDAQ:ATER) continuing to rally, this morning’s biggest pre-market stock movers, and more. You can get up to speed on all of this news at the following links!
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On the date of publication, William White did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.