It has been a stunning day for the Nova Minerals Limited (ASX: NVA) share price according to some investment websites.
However, all may not be what it seems if you dig a little deeper.
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What's going on with the Nova Minerals share price today?
At the time of writing, the Nova Minerals share price is trading at $1.16. This is up 800% from 13 cents at Friday's close.
While the difference in its share price may technically be accurate, something occurred between Friday's close and Monday's open that means the gains are not.
Last week shareholders approved a share consolidation that will see the gold explorer's share count reduce ten times from 1,802,037,557 shares to approximately 180,203,755 shares.
This meant that the Nova Minerals share price would be $1.30 post-consolidation (13 cents x 10).
As a result, rather than gaining 800% today, Nova Minerals' shares have actually lost approximately 11% of their value instead.
Why is the company consolidating its shares?
Management provided a number of reasons for why it is consolidating its shares. These includes greater investor interest, improved trading liquidity, and brand image.
It commented: "As a gold developer with a rapidly increasing resource base, Nova is expected to appeal to many new investors over the coming year. The primary motive for the equity consolidation is to expand the eligibility of Nova ordinary shares for institutional investors, stock exchanges, indexes and investment funds, including exchange traded funds (ETF's). With the increasing prevalence of passive trading rather than active fundamental investing, we intend to ensure that Nova is not prohibited due to minimum share price screening."
As for improving trading liquidity, it explained: "An increased interest from investors may improve trading liquidity of the ordinary shares."
Finally, in respect to its brand image, the company said: "Nova is graduating from an explorer to a developer and growing its intrinsic value through its investments. An analysis of Nova's new peer group of junior developers indicates that this restructuring of ordinary share capital is appropriate for the company at this time with such a large asset base."
