Shares of on-demand private jet provider Wheels Up Experience (UP +5.21%) are down 25% today as of market 3:45 p.m. ET after the company announced it would be undergoing a 1-for-20 reverse stock split. The shares will begin trading on a split-adjusted basis on April 27, 2026. This split should help Wheels Up regain compliance with the NYSE's listing standards and maintain eligibility for inclusion in the Russell 3000.
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While a reverse stock split technically changes nothing about a company's actual operations -- the "pizza" remains the same size, but with differently sized slices -- they aren't a great sign for investors. Usually, a reverse stock split signals danger as it is tied to poor price performance and the potential for institutional selling, as many funds won't hold stocks below $1. A reverse stock split also suggests there may not be an immediate catalyst for the stock to rebound on its own. Already down 99.6% from its 2020 IPO, Wheels Up hasn't done enough to reassure investors that they shouldn't worry about the upcoming stock split, which helps explain today's negative reaction.
NYSE: UP
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To be fair to Wheels Up, however, I like the company's expanded partnership with Delta Air Lines (DAL +0.73%) to build a hybrid private and commercial jet offering for its customers. Delta also owns nearly 40% of Wheels Up, so it remains incentivized to make the partnership work. I also think Wheels Up's shift to a premium membership makes a lot of sense, as higher-margin bookings could help the company finally reach profitability.
However, as this shift takes place, the company saw sales dip 10% in its latest quarter, due to the intentional winding down of its lower-margin legacy memberships and group charter sales. That said, Wheels Up's net profit margin improved from -42% in Q4 last year to -16% this year, so if it keeps trending in this direction, a turnaround could be in store. Ultimately, Wheels Up is an uber-high-risk stock that Foolish investors should probably avoid until it can prove capable of profitability.
