Video-game retailer GameStop (NYSE:GME) is known on Wall Street for being the target of a Reddit-fueled short squeeze in 2021. So, some onlookers might have expected GME stock to zoom higher after GameStop recently announced an upcoming share split.
Here’s the scoop. According to a Form 8-K filing, on March 31, GameStop disclosed its plan to request stockholder approval at a future annual shareholder meeting “for an increase in the number of authorized shares of Class A common stock from 300,000,000 to 1,000,000,000 … in order to implement a stock split of the Company’s Class A common stock.”
This is exciting news — no doubt about that. For one thing, CNBC suggested that GameStop could use the share-count increase to possibly sell more stock at some point. The implication, we can assume, is that GameStop could get a sizable capital infusion from selling more of its shares.
Second, GameStop is now part of a larger trend of stock split mania. This includes recent and soon-to-be share splitters like Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL), Amazon (NASDAQ:AMZN) and Tesla (NASDAQ:TSLA).
With all of that in mind, it should make sense that social media traders would have pumped up the GME stock price. Right? Well, things don’t always happen as expected on Wall Street.
As it turned out, the GameStop share price actually fell from $170 to $146 over the following week, after the stock split announcement. Perhaps this happened because the aforementioned Form 8-K didn’t provide enough details.
In particular, InvestorPlace Editor Sarah Smith pointed out that GameStop hadn’t announced the date and location for the annual meeting. Moreover, there’s some uncertainty because GameStop’s shareholders still need to vote to approve the share split.
This presents an opportunity, though. Just maybe, its a case of “buy the rumor, sell the news, then buy the actual event.”
Perhaps, GME stock will turn around if/when the company actually does enact a share split. This would make the stock more affordable, and could potentially generate more capital for GameStop.
So, investors might want to be patient and hold their GameStop shares. There could be a delayed positive reaction from investors, but hey, it’s better late than never, as they say.
On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
