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As GameStop surged in reaction to the stock split news, the company’s shares closed at $117.43.
Shares of electronics retail company GameStop Corporation (NYSE: GME) advanced nearly 9% in reaction to its four-for-one stock split. On 6th July, the trailer announced that its board had approved a four-for-one stock split, making it more affordable for investors to own the company’s shares. Companies decide on stock splits to help interested investors buy their shares at affordable prices without impacting the firms’ valuation. Top US companies like multinational technology company Apple (NASDAQ: AAPL) have offered stock split options to investors in the past. Amazon (NASDAQ: AMZN) and Tesla (NASDAQ: TSLA) have also opted for stock splits. Amazon split its shares in a 20-for-1 stock split last month, while Tesla went for a 3-for-1 stock split.
GameStop, a major attraction of last year’s “meme stock” trading frenzy, is about to join the pool of US companies opting for stock splits. The electronics retail company spiked over 680% in 2021 as retail traders on Reddit heavily shorted the stocks to squeeze out hedge funds betting against them.
GameStop Receives Approval for Four-in-One Stock Split
Back in March, GameStop said it would seek approval from shareholders for the stock split. The split will increase the company’s outstanding Class A common shares from 300 million to 1 billion. All shareholders who own the stock at the close of the market on 18th July will receive three additional shares for each share of Class A common stock owned as dividends. The retailer will distribute the dividend after the market closes on 21st July. After the distribution, trading will begin on a split-adjusted basis the following day.
As GameStop surged in reaction to the stock split news, the company’s shares closed at $117.43. However, it is currently trading at $127.90 in extended trading, losing more than 4% in the last five days. The company has lost 20.86% since the year started amid Russia’s invasion of Ukraine, inflation, and fears of a global recession. Additionally, the company has declined 38.41% in 12 months and 25.03% in the last three months. GME has plunged 15.35% over the past month.
Speaking on the GameStop four-for-one split, Wedbush Securities analyst Michael Pachter noted:
“GameStop management knows that they have a 100% retail shareholder base and so, they are catering to them. If (the stock split) is a distraction because the NFT market is dead, and that was the last thing that they did that tried to get people excited.”
GameStop pushed into the digital assets market in March, announcing crypto and NFT wallets for gamers and others. The self-custodial Ethereum wallet can be used to store, send, and receive cryptocurrencies and non-fungible tokens. The company had partnered with Immutable X on the NFT marketplace before unveiling the digital assets wallet.