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Meme stock GameStop jumps on share split bandwagon

gamestop

GameStop Corp’s (GME.N) board has approved a four-for-one stock split that will make it more affordable for investors to own shares of the video-game retailer at the center of last year’s “meme stock” trading frenzy.

Shares of the company shot up 5.8 per cent to $124.49 in extended trading on Wednesday after the announcement.

Several major US companies have opted for stock splits over the past two years, including Apple (AAPL.O), Tesla (TSLA.O) and Amazon.com (AMZN.O).

A stock split makes shares more affordable for individual investors by lowering the price without affecting the company’s valuation.

Shares of GameStop skyrocketed more than 680 per cent in 2021 thanks to retail traders on social media platforms such as Reddit who snapped up heavily shorted stocks in a bid to squeeze out hedge funds betting against them.

“GameStop management knows that they have a 100 per cent retail shareholder base and so, they are catering to them,” said Wedbush Securities analyst Michael Pachter.

“It (the stock split) is also a distraction because the NFT market is dead, and that was the last thing that they did that tried to get people excited.”

This year, the video-game retailer’s shares have wound down roughly 20 per cent as the Ukraine crisis and fears of a global recession clouded sentiment.

The company said in March it would seek shareholder approval for the split which would increase its outstanding Class A common shares to 1 billion from 300 million.

Under the split, shareholders will receive a stock dividend of three additional shares of GameStop’s Class A common stock for each share held.

The dividend will be distributed after markets close on July 21.

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