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GameStop plans to propose a stock split of company shares to its shareholder base in order to attract more retail investors.
Shares of GameStop Corp (NYSE: GME), the world’s largest retail and trade-in destination for video games, surged more than 10% following a company stock split announcement. The meme stock initially spiked up to 17% in after-hours trading after the planned company development. As of press time, GME was changing hands above the $200 price threshold, and bullish retail traders expressed their optimism.
Details on the Proposed GameStop Shares Stock Split
According to GameStop, it intends to increase the number of its Class A common stock from 300,000,000 to 1,000,000,000. Furthermore, this will partly conduct a stock split in the form of a stock dividend and “provide flexibility for future corporate needs”. However, GameStop also points out that its plans depend on the shareholder approval it will seek at its next shareholder meeting. As the company put it:
“GameStop’s Board of Directors has approved both stockholder proposals, but the stock dividend will be contingent on final Board approval.”
Furthermore, GameStop also suggested that the coveted board authorization would provide “flexibility for future corporate needs”. It still remains unclear how much of the video game retailer’s increased share count will go towards the stock split.
As it stands, GameStop added a clause in a March 31st regulatory filing that suggested what to do with the share increase. According to the company, part of the share increase could be channeled toward other company interests. For instance, GameStop may sell more stock.
Stock splitting among companies is a common way of making share prices less expensive and more accessible to retail investors. In spite of the perceived increase in appeal, splitting a stock does not affect its underlying fundamentals.
GameStop’s stock ascended to meme territory back in early 2021, following a social media-fueled trading frenzy. Shares of the video game retail giant exploded in massive popularity and reaped monumental gains virtually overnight. Although that era has since tapered off, GameStop’s stock still sits astronomically higher than where it once was two years ago. For instance, in March 2020, GME was trading at a paltry $3. As of Thursday’s close on March 31st, the meme stock was hovering above $165, before climbing further to $198.50 in after-hours trading.
GameStop’s shares recently rallied over a 10-day span after company chairman Ryan Cohen picked up an additional 100,000 shares in late March. As it stands, the entrepreneur and activist investor now has an ownership stake of almost 12%.
Founded in 1984 as Babbage’s, GameStop is an American video game and accessories, consumer electronics, and gaming merchandise retailer. Headquartered in Grapevine Texas, the leading gaming retailer is the largest of its kind in the world with 4,816 stores in operation. Around 3,192 of these are in the US, with 253 more in Canada, 417 in Australia and New Zealand, and 954 in Europe.
GameStop only started going by its current given name fifteen years after its inception in 1999