How will the ADS-to-ClassâŻA share conversion ratio affect the liquidity and pricing of QH's shares on NASDAQ?
The conversionâratio change directly alters the âshareâperâADSâ denominator that the market uses to price QHâs NASDAQâlisted ADS. If the company moves to a higherâratio (e.g., 1âŻADSâŻ=âŻ10âŻClassâŻA shares instead of the current 1âŻADSâŻ=âŻ5), each ADS will represent more underlying equity, so the total number of ADSs on the exchange falls. The float shrinks, which typically tightens bidâask spreads and makes the remaining ADSs more âpremiumââpriced â the perâADS price will rise, but the overall marketâcap remains roughly unchanged because the underlying equity value is unchanged. The reduced float can also boost shortâselling costs and raise the cost of borrowing, which may deter some speculative activity and increase the âholdingâcostâ premium for long positions.
Conversely, a lowerâratio (e.g., 1âŻADSâŻ=âŻ2âŻClassâŻA shares) expands the ADS float, boosting daily volume and depth on the order book. Liquidity improves, spreads narrow, and the perâADS price will fall proportionally to the smaller claim on the equity pool, making the stock more accessible to retail and algorithmic traders. The larger float can also attract more institutional participation, but the lower price may invite higher volatility as the market digests the new supply dynamics.
Trading takeâaways
- Watch the ratio announcement details: a move that cuts the float will likely trigger a shortâterm priceâupward bias and tighter spreads; a move that expands the float will create a priceâdown adjustment and higher turnover.
- Position ahead of the change: if the ratio will increase, consider a modest long position to capture the premium; if it will decrease, a shortâside or a âsellâhighâbuyâlowâ swing may be appropriate as the ADS price normalises.
- Monitor postâconversion order flow and spread compression: the new liquidity profile will be evident in the first 1â2âŻweeks of trading, offering opportunities to trade on the emerging supplyâdemand imbalance.