Shares of funeral services company StoneMor (STON) skyrocketed by an eye-popping amount on Monday morning. At one point, the stock was up 97% and had been halted due to heavy trading volume. However, as of 11 a.m. EDT, StoneMor stock was "only" up 39% for the session. But that's still quite a jump for the otherwise sleepy stock.
There wasn't any news released from StoneMor today. However, the company was cited in the Global Digital Funeral Services Market Study 2019 by HTF Market Intelligence. This report predicts substantial growth in the digital funeral space through 2026 and named StoneMor (among others) as a beneficiary of the trend. And this report was referenced today by a website called Cabell Standard.
While the link seems weak to me, I have to acknowledge that the article from Cabell Standard coincides with the spike in StoneMor stock. So there may be something there. Perhaps investors stumbled upon the study and excitedly purchased shares of StoneMor.
Based on how quickly StoneMor stock skyrocketed this morning and how fast it came back down, some investors are seeing signs of a pump-and-dump scheme, where investors artificially inflate the price of a stock and then sell it to profit off of the surge in investor interest. While that's certainly easy on a penny stock like StoneMor, that seems unlikely to me as well. According to Yahoo! Finance, the stock has 78% institutional ownership -- unusually high for the typical pump-and-dump target.
While neither factor seems to adequately explain StoneMor stock's outsize move today, sometimes it's just that way. Really, we aren't talking about the stock. We're trying to understand what investors are motivated by today -- their psychology. And that's a deep subject that we don't always have clear insight into in specific cases like this.
StoneMor is going to report financial results for full-year 2020 tomorrow, March 23, after the market closes. That's something for investors to watch. Management said sales were up double digits in the fourth quarter, and will provide more color tomorrow. However, the real news is that these strong results have management looking to refinance its debt.
As of the last quarter, StoneMor had over $327 million in long-term debt, which is substantial for a small-cap stock. Therefore, the ability to refinance under more favorable terms would be significant for the company.