GameStop Corp. (GME) shares soared more than 15% in after-market trading on Thursday, March 31, after the brick-and-mortar video game retailer turned meme market darling announced plans to implement a stock split.
- GameStop plans to seek shareholder approval for a stock split in the form of a dividend.
- If approved, the stock split would increase the number of GameStop Class A common shares from 300 million to 1 billion.
- The video game retailer joins Google parent Alphabet, Amazon, and Tesla, which recently announced upcoming stock splits.
- GameStop says the stock split would "provide flexibility for future corporate needs." Lower-priced GameStop shares may also attract retail meme-stock enthusiasts.
- As part of its transformation to a technology-focused company, GameStop plans to open an NFT marketplace by the end of the second quarter.
More Appealing for Meme-Stock Enthusiasts
Although share splits don't fundamentally change a stock's valuation, they lower its price, making it more appealing—particularly to retail investors. Given GameStop shares have doubled to $166.58 in the past two weeks, a split reducing their price may attract more interest from meme-stock enthusiasts.
Aside from traders flooding back into speculative plays over the past month, shares in the video game retailer also received a boost after a regulatory filing showed that the company's chairman and activist investor Ryan Cohen had purchased an additional 100,000 shares, taking his stake in GameStop to 11.9%.
Stock Splits Take Wall Street by Storm
GameStock joins a growing list of other high-profile companies that have either split their stock or have plans to do so in the near future. In the past two years, Apple Inc. (AAPL), NVIDIA Corporation (NVDA), and Tesla, Inc. (TSLA) have had stock splits, while Google parent Alphabet Inc. (GOOGL) and e-commerce giant Amazon.com, Inc. (AMZN) shareholders have authorized splits that take effect later this year.
On Monday, March 28, Tesla announced it had plans for another stock split but did not provide specific details. Despite slumping as much as 34% this year, the electric car maker's stock has regained traction in recent weeks and was trading back above $1,000 per share through the close of trading on Thursday, March 31.
Since 1980, stocks that have split their shares have outperformed the S&P 500 by an average of 7.8% after three months, 13.9% after six months, and 25.4% and 12 months, according to data compiled by the BofA Research Investment Committee.
Transformation to Technology Company
In recent years, GameStop has revealed plans to pivot from a traditional strip-mall video games retailer to a technology company focusing on e-commerce.
In January, the company said that it would be launching its own non-fungible token (NFT) marketplace by the end of July, adding that it has hired dozens of specialists in blockchain, e-commerce, and technology. "We recognize that our special connection with gamers provides us a unique opportunity in the Web 3 and digital asset world," GameStop executives told investors on its latest earnings call.