GameStop’s (NYSE:GME) stock is up more than 7% today after shareholders of the video game retailer voted in favor of four-for-one stock split.
The stock split will take the form of a dividend and be distributed after the close of trading on July 21, the company said in a statement. GME stock will begin trading on a split adjusted basis on July 22. So far this year, the company’s share price has fallen 13% to $128 per share.
What Happened
GameStop had announced plans to split its stock in March of this year. Shareholders voted to support the split at the company’s annual meeting this week. Once executed, shareholders will receive three additional GME shares for each one they already hold.
The stock split involves the company’s Class A common stock. If the four-for-one split were executed today, it would lower GameStop’s share price to $29.36 from its closing price yesterday of $117.43. With the stock split, the number of GameStop’s outstanding Class A shares will grow to one billion from 300 million previously.
The stock split comes as GameStop seeks to pivot from its retail business model to a new e-commerce strategy.
Why It Matters
After nearly a decade of few stock splits taking place, the practice is suddenly popular again. Several other companies have undertaken stock splits this year, including Amazon (NASDAQ:AMZN), Shopify (NYSE:SHOP), and Google parent-company Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL).
Stock splits are viewed by companies as a way to ignite a rally in their shares as retail investors buy them at the lowered post-split price. However, success is not guaranteed. Amazon’s stock has fallen more than 5% since the e-commerce giant split its stock on a 20-for-1 basis at the start of June.
GameStop is known as the original “meme stock” and its share price has risen and fallen dramatically over the last 18 months as retail traders have executed multiple short squeezes on the stock.
What’s Next for GME Stock
GME stock will become more affordable to buy once it begins trading on a four-for-one split adjusted basis July 22. The fact that GameStop’s stock is up today indicates that investors approve of the upcoming split. However, it remains unclear if the stock split will bring stability to the company’s share price or lead to another short squeeze. As always, anything seems possible with GameStop 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.
