A Look at Gamestop and Other Notable Stock Splits
Last month, Gamestop’s (GME) shareholders authorized expanding the company’s shares to one billion from 300 million, in order to facilitate a stock split. This week, the video game and electronics retailer announced the split will take effect later this month. Shareholders of record at the close of business on July 18 will receive three additional shares for each owned.
This is also known as a stock dividend. It doesn’t change the overall value of an individual stockholder’s stake, but rather adjusts downward the price of each share. Essentially, it cuts the pie into smaller pieces.
Meme Stock Memories
The run up to Gamestop’s split dates back to January of 2021, when Chewy (CHWY) co-founder Ryan Cohen announced a stake in the video game seller. He launched a campaign aimed at forcing a short squeeze, as a number of investors bet against Gamestop given the shift in the way video games are increasingly sold — digitally rather than at retail stores.
As part of the so-called “meme stock” run, Gamestop’s share price catapulted to an intraday high of $483.00 on January 28, 2021. The stock eventually backed off that level, but has traded as high as $255.69 over the past 12 months. Cohen has since invested in customer-care efforts, focused on selling more computer supplies and TVs. Additionally, there are plans in the works to launch a NFT marketplace.
Why Stock Splits?
Stock splits lower the price of individual shares. This is done to potentially make the stock more attractive and affordable to retail investors. A good example of this is Google parent Alphabet (GOOGL). In February, it announced a 20-for-1 stock split, after its share price had more than doubled since March 2020. It takes effect on July 15.
Other tech stocks have enacted similar splits in recent years. Both Apple (AAPL) and Tesla (TSLA) split shares on the same day in August of 2021. Chipmaker NVIDIA (NVDA) split 4-for-1 a year ago this month. These companies hope to gain more investors during a time when retail trading has exploded in popularity, a trend that dates back to the start of the pandemic.
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