Shares of GameStop (NYSE:GME) are trending today after the video game retailer split its stock on a 4-for-1 basis.
GME stock is now trading at $38 per share following the split. Shareholders of record received three additional shares for each one they previously owned. GameStop first announced plans to split its stock in March of this year, and shareholders approved the move at the company’s annual meeting in June.
Before today’s stock split, GameStop’s share price had fallen 75% year-to-date and was trading at $158.75 per share.
What Happened
The stock split lowers the price at which investors can purchase GME stock to $38, and the more affordable cost might attract individual, price sensitive investors to the shares, leading to a renewed rally. A stock split doesn’t change the underlying fundamentals or value of a company, but divides existing shares into smaller pieces.
However, stock splits make the shares of companies more affordable and can increase the shareholder base. GameStop is following several other high-profile technology companies that have also split their stocks this year, including Amazon (NASDAQ:AMZN) and Google parent company Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL), which each split their shares on a 20-for-1 basis. Electric vehicle maker Tesla (NASDAQ:TSLA) has announced plans to split its stock on a 3-for-1 basis.
Why It Matters
GME stock continues to draw attention and be closely followed by investors and the business press. Known as the original “meme stock,” GameStop shares have been caught in a short squeeze several times over the past 18 months and risen above $350 before crashing back to earth.
Investors, analysts, and the media will be watching to see if the stock split will lead to a new rally in GME shares. The stock split has attracted a lot of chatter on social media channels, including the WallStreetBets subreddit that is popular among retail investors and day traders. However, the initial reaction to the stock split appears muted, with GameStop stock up only a slight 0.22%.
What’s Next for GME Stock
We’ll see if GameStop’s stock split has a significant impact on the share price. The split was well telegraphed by the company and documented in the press, so the news may already be priced into the share price. But, as is usually the case, it is difficult to predict what will happen with this highly volatile stock.
On the date of publication, Joel Baglole 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.
