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As a stock split draws private investors, GameStop's stock price climbs

Aria Thomas

Jul 08, 2022 11:07


GameStop Corp (NYSE:GME) shares soared more than 10 percent on Thursday after the video game retailer announced a four-for-one stock split to revive dwindling retail excitement during a market slump.


The stock, which was last valued at $127.70, was the most actively traded on the retail trading platform of Fidelity Investments.


GameStop shares have plummeted 20% this year, mirroring the downfall of other industry darlings as recession fears weakened risk assets.


"Currently, the obvious explanation is the stock split; nevertheless, is this trend sustainable? As the company trades on fewer fundamentals than the rest of the market, it is tough to generate estimates "said Dennis Dick, a proprietary trader at Bright Trading.


In 2021, GameStop and AMC Entertainment Holdings Inc. were at the focus of a meme-stock trading craze when normal investors used social media to penalize hedge funds that had bet against the firms.


According to Giacomo Pierantoni, an analyst at Vanda Research, since then, individual investors have selected broad shares, ETFs, and large-cap technology firms in the hopes of earning double-digit returns by banking on a long-term recovery.


Pierantoni remarked that individual investors "had already lost a large amount of money and cannot afford to lose more on sporadic bets."


Typically, stock prices rise after the announcement of a stock split, since the lower per-share price enhances liquidity and makes the company more accessible to retail investors.


This year, GameStop will split its equity with Amazon (NASDAQ:AMZN) and the parent company of Google, Alphabet (NASDAQ:GOOGL).


The investing director at AJ Bell, Russ Mould, emphasized that stock splits do not affect a company's fundamentals. Long-term, fundamentals will be more important than issues like this.


GameStop first announced board approval for the stock split in March.


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