What happened
Shares of Kalera (KAL) were plunging 20.2% at 11:03 a.m. ET Friday morning after shareholders of the specialist in alternative farming methods (known as "vertical farming") approved a 100-for-1 reverse stock split yesterday.
The reverse split became effective today and began trading on a split-adjusted basis at the market's open. Prior to the reverse split, there were 91.9 million shares outstanding. The 20.2% decline today is split-adjusted.
So what
As the name implies, vertical farming seeks to grow plants vertically rather than in horizontal rows in the ground. The reasoning behind it is that because land is scarce and expensive, and demand for food continues to increase, new methods of growing are needed. Vertical farming tends to rely on aquaponics, aeroponics, and hydroponics instead of soil.
According to 2020 data from Emergen Research, the vertical gardening industry is expected to grow 23.5% annually and hit $20.2 billion by 2030.
Image source: Gett Images.
Kalera began trading on the Nasdaq exchange in February at an unadjusted price of $14 a share after merging with Agrico Acquisition, a special purpose acquisition company (SPAC). At the time, it had four facilities in operation and six under construction.
The purpose of the reverse split is to raise the stock price to bring Kalera into compliance with the Nasdaq's listing requirement regarding minimum share price.
Now what
Vertical farming stocks have been horrible investments. Kalera has lost 99% of its value this year while Hydrofarm Holdings Group is down 94%, and AppHarvest has dropped 85%. While Hydrofarm goes for $1.60 a share, AppFarms trades for pennies on the dollar, and investors might expect a reverse split there as well if it wants to keep its Nasdaq listing.