The GameStop stock price before its stock split

It’s been a volatile four months for shares of GameStop (NYSE:GME) since the company announced its planned stock split on March 31. The stock split is due to take place at the close of Thursday, July 21.

Four-to-one split

On March 31, GameStop announced plans to conduct a stock split by increasing the number of shares from 300 million to 1 billion. A stock split doesn’t necessarily increase a company’s market capitalization, but it does make a stock more attractive and affordable to small investors.

At the time of the announcement, GameStop said the move “would provide flexibility for future business needs.” What those companies need remains a mystery, with some analysts criticizing the stock split as a way to rekindle fading interest.

The plan won board approval on July 6 and on Monday, July 18, shareholders will receive three additional shares for each of their Class A shares, which will be distributed after the close of trading on July 21.

Share price since the announcement of the split

In the four months since the split was announced, GameStop shares fell to $77.77 on May 12 and to $153.00.

The company closed 4% higher on the New York Stock Exchange on Friday and up 3.5% the following Monday at $146.64, a nearly three-month high.

Based on its closing price on Monday, the split would mean GameStop’s stock price would only cost around $36.

GME 1D, with pivot points

Stock split mania

GameStop’s move follows that of tech heavyweights like Apple (NASDAQ:AAPL) and Tesla (NASDAQ:TSLA), which enacted stock splits in 2020 and further stock splits by Alphabet (NASDAQ :GOOGL) and Amazon (NASDAQ:AMZN) this year.

The need for Alphabet and Amazon stock splits was also expected as their stock prices have hovered around $3,000 in recent months.

But for GameStop, some financial watchers have questioned the company’s intention to spin off because its finances aren’t keeping up with its share price. In the fiscal year ended Jan. 29, GameStop suffered a net loss of $381 million, up 77% from its loss of $215 million in 2020. And that’s despite revenue dropping from 5 $.09 billion to $6.01 billion.

There were also fears that GameStop could go bankrupt as the company announced store closures and incurred millions of dollars in debt.

In its latest earnings report, however, the company’s first-quarter revenue beat market estimates, which some attributed to its shift to a more web-centric model. The company previously announced plans to move into non-fungible or NFT tokens by the end of the second quarter of fiscal 2022.

The plan raised some eyebrows from market watchers, including Wedbush analyst Michael Pachter, who called the move “nonsense”, saying he “won’t have any NFTs to sell or customers, and that the wallets they provide will be empty”.

Karen J. Nelson