Key points:
- GameStop rally sparked once more with the proposal of a stock split, GME surged 20%
- The proposal suggests an increase from 300M shares of Class A common stock to 1B
- Move follows recent stock splits from Alphabet, Amazon and Tesla
Prevailing meme stock GameStop (NYSE: GME) extended its March rally in postmarket trading yesterday by over 20% on news that the company is planning a stock split. It’s a popular move from companies looking to build traction amongst retail traders, who often flood into the stock on its lowered price tag. GameStop’s retail hype appeared to be tailing off since the end of last year, but a new spring surge was triggered following a decision from CEO Ryan Cohen to purchase a purchase 100,000 shares; increasing his stake to just under 12%.
The split proposal suggested an increase from 300M shares of Class A common stock to 1B; a move that unsurprisingly welcomed back swathes of retail investors looking for discounted entry. Completely sentiment-driven moves are a key motivator of stock movements, but investors shouldn’t forget that the price surge is not attested to any news of promising financial developments, but as we know from GameStop and Reddit history; that’s not all that important.
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Interestingly, GameStop hasn’t been the first large-cap company to offer a recent stock split. The decision follows closely similar moves made by tech giants Alphabet and Amazon and EV giant Tesla in recent weeks; all of which spurred similar rallies. Perhaps the decisions are a product of the current economic uncertainty that has been governing markets; when buyers are inactive, an offering of a stock split might just be the ticket to welcome them back.
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This, along with the confidence gained along with Cohen’s share purchase has been enough to throw GameStop back into public favor amongst retail traders, who seemingly lost confidence in the once defiant meme-stock. Currently trading at a premarket gain of 13.5%, it will be interesting to see how the market reacts to the opening bell.