Sprint (S) Joins The List Of Penny Stocks; Now What?

We Speculated On This And Now Sprint Can Be Called A Penny Stock

Back in early December, I wrote about Sprint (S – Free Report) and I wanted to revisit that once again a little over a month later. Though it’s nice to see positive news about penny stocks, we also like to highlight risks. If you remember back in March of last year, we started paying attention to Nio (NIO – Free Report) after bad headlines and negative sentiment started pressuring the stock. We warned readers that it could be at risk of becoming a penny stock and when we define penny stocks, we’re going by price in this case.

According to the SEC’s definition of a penny stock, it’s an equity with a share price of $5 or less. Though some traders may have their own definitions of what a penny stock is, the Securities & Exchange Commission’s is the one we’ll go by for the time being.

Surely enough, Nio tumbled for months to follow. The company’s mismanagement and declining growth didn’t help the cause. By the time shares hit 52 week lows for the last time in 2019, it tapped $1.19 per share. This was a stark difference from where it was earlier in the year. In 2019, Nio stock traded as high as $10.64.

Sprint Is Now A Penny Stock

This week we updated our Twitter followers and reminded them of our December warning about Sprint as share prices deteriorated. We posed the question, “Who thinks this is about to join the ranks of #pennystocks before the weekend?”

Later on January 9, Sprint officially entered penny stock territory for the first time since April of 2018. Obviously, it’s no stranger to penny stock levels but how it arrived here has investors nervous. On January 10, the stock continued its freefall as prices hit lows of $4.86. That’s a decline of nearly $1 per share since our December commentary.

There are many things that have raised both questions and concerns throughout the last few quarters. Besides the legal proceedings buzzing about the Sprint / T-Mobile (TMUS – Free Report) merger, there’s a matter of conduct. There’ve been several accounts of the company inaccurately reporting information.

Specifically, government programs like the “Lifeline Program” gives discounts to phone users that meet the plan’s criteria. In turn, the service provider (Sprint) is granted subsidies. This wasn’t the first time reporting mistakes happened either. You can read more on this in our original report:

Is Sprint Corporation (S) At Risk Of Becoming A Penny Stock?

But, again, we also have an issue of a U.S. probe into the merger deal. Lawyers for New York and California are hard-pressed to pushback against the deal. “The federal government approved the merger with what appears to be only a cursory examination of the approval conditions,” the states said.

What’s Next For Sprint?

But here we are; Sprint is a penny stock right now. However, as we saw with Nio (much later), the trend may not persist forever. With the case of Sprint, you also have to keep in mind that if these lawsuits are thrown out and a merger does go through, it could be a completely different story for the now-penny stock.

On Friday, a Washington, D.C. federal court set January 24 as the deadline for briefs in its Tunney Act proceeding. According to its definition, the Tunney Act, “requires federal courts to review each consent decree in civil antitrust cases filed by the DOJ to ensure that the remedy proposed in the consent is in the public interest.”

Two US agencies already rubber-stamped the deal but the multiple state attorneys general in several states have gone against the grain. Closing arguments in these lawsuits are scheduled for Wednesday.

If the states win, the Tunney review is basically a wash. However, if the companies come up with a “W,” there could be a chance the two respective executive teams will work towards swift close to the transaction. I guess we will see what happens in the coming week. Sprint closed the January 10th session at $4.88 a share, which is considerably lower than the offer price made by T-Mobile.