While we typically focus on penny stocks that are currently meeting the definition, we have started getting questions on research on other popular stocks. Not necessarily research in the sense of a full report but rather if a high-flying equity was ever a penny stock in the past. This is never a bad question to ask but it can be tricky. Today we were asked if one of the top stocks today, Arcus Biosciences (RCUS Free Report) was ever a penny stock.
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If you’re new to this world of low-priced stocks, it’s important to know some definitions, first. The main definition is regard what a penny stock actually is considered. According to the Securities and Exchange Commission, the definition of a penny stock is as follows:
So we can safely say anything falling under $5 could be considered a penny stock. Over the last 3.5 months, we’ve seen many different companies “come through the penny stock door”. Think back to some of the real estate stocks. Names like MFA Financial (MFA Free Report) and NY Mortgage Trust (NYMT Free Report) are now penny stocks. These were trading higher than $5 for the better part of the last year.
Are All Penny Stocks Bad?
But obviously trouble came knocking and the bottom fell out, which saw those stocks tumble into penny stock territory. Even more recently we saw top biotech company Amarin (AMRN Free Report) drop from over $12 to as low as $3.95. Shares have since popped back above $5 but all the same, readers were able to catch a glimpse of a company that has become one of the top-performing biotech penny stocks this month.
Remember though, that even with these few examples, just because something is or was a penny stock doesn’t mean it is or was a bad company; or one you should ignore. We’ve seen, first hand, some of the biggest success stories this year. Times where coronavirus penny stocks or even manufacturing penny stocks traded well-below $5 and ended up running to $20, $40, or like we saw with Liberty TripAdvisor (LTRPB Free Report) yesterday, $134 a share.
Typically a company trades as a penny stock because it’s still in the emerging stages. On the flip-side, a company may become a penny stock because it could be transitioning with an industry. This is what we saw with most real estate stocks. While cheap stocks will carry higher risk, the rewards can be even greater. So keep that in mind if this is your first glimpse into the world of stocks under $5.
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Will Arcus Biosciences Do A Deal With Gilead?
So let’s get back to the topic at hand, Arcus Biosciences. The company made big headlines this week and the market responded in wild fashion. Shares of the company jumped from around $17 to highs of $31 on Thursday. This was also in light of the fact that the stock had been in a multi-week uptrend since March 20.
This week, chatter picked up on the company’s possible partnership with Gilead Sciences (GILD Free Report). And while some may have simply assumed its major shareholder, Alphabet (GOOG Free Report) would do something “COVID-related,” the rumor mill suggested otherwise. Specifically, Gilead was said to be eyeing a stake in Arcus Biosciences and potential implement a development partnership. Bloomberg originally broke the story, citing people “familiar with the matter”.
As we’ve seen, it’s important to keep tabs on what has been confirmed by companies and what has not. While those of us trading penny stocks have seen the big wins from rumors, we’ve also seen the losses if rumors are left unconfirmed or even worse, denied entirely. For now, representatives from both Arcus and Gilead refused to comment on the matter according to Bloomberg.
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If you remember last year, we heard rumors about Fitbit’s (FIT Free Report) potential deal with Google. While we managed to cover that story religiously, nothing was confirmed for quite some time. Shares of FIT even slumped when traders doubted the validity of statements made by “people familiar with the matter.” However, as we’ve all now seen, rumors were true for Fitbit. Will they be the same for Arcus and Gilead? Comment below with your thoughts.
Was Arcus Biosciences Ever A Penny Stock To Buy?
When it comes to Arcus Biosciences, the company IPOd in 2018 at $15 and raised $120 million. If you read through the filings, you’ll see that on March 9, 2018, the Company effected a reverse split of all shares of its common and preferred stock at a ratio of 1-for-3.96. So would that technically mean it was a penny stock prior to the IPO given its IPO price?
That’s a stretch in my opinion. That’s because this wasn’t at the time when the company was public. So I wouldn’t regard it as a penny stock after the official IPO price came to $15 when the public was able to start trading it.
There was a time, however, during the summer of 2019 where shares of RCUS stock came within striking distance of becoming a penny stock nonetheless. On August 5 shares reached lows of $6.30, just shy of the upper limit of the penny stock definition’s range. While it’s important to note a stocks’ price, also understand that it doesn’t negate the potential of the underlying company.
Those who “wouldn’t touch stocks under $5” or under $10 would have missed out on a big opportunity in Arcus based on where it’s gone. Anyone holding shares from August through today has seen their position nearly quadruple in less than 9 months. But given the limbo that these reports have left the market, what will be the fate of Arcus Biosciences? Let us know what you think in the comments below.
