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GameStop is surging again on first stock split in 15 years

AP – Shares of GameStop surged on Friday after the video game retailer announced that it would attempt its first stock split in 15 years.

The Grapevine, Texas, company said in a regulatory filing late Thursday that it wants to increase its share count to one billion, from 300 million, so it can implement a stock split in the form of a dividend. It plans to seek shareholder approval at its upcoming annual meeting.

A stock split would change the price-per-stock, but not the overall value of those holdings. The manoeuvre can push up a company’s stock price at least temporarily, and it did so on Friday. Shares of GameStop jumped eight per cent at the opening bell.

JPMorgan said on Friday that while stock splits may not be the new buyback, they are “an additional tool to push stock prices higher despite financial theory saying otherwise”.

GameStop’s announcement comes just days after electric vehicle maker Tesla announced its second stock split in less than two years. In addition, Alphabet, Google’s parent company, announced a 20-for-1 split in February. Amazon said this month that it would do a split of the same ratio.

File photo shows a GameStop store in New York. PHOTO: AP

Big tech companies have pursued stock splits after major run-ups in the price of their shares, which can open the door to retail investors that do not have the financial heft to buy shares that head into quadruple digits.

However, a single share of Google, Tesla, or Alphabet cost between USD1,000 and USD3,300. And shares of Tesla, Alphabet and Apple are up between 30 per cent and 60 per cent over the past 12 months.

Shares of GameStop are down 13 per cent over that same stretch and can be had for less than USD200 each.

Yet GameStop Corp became a meme darling early last year when hundreds of thousands of smaller investors suddenly started buying its shares, driving its price to heights that shocked Wall Street. The shares rocketed from USD39 to USD347 in just a week during its run-up.

Any manoeuvre from the company garner intense interest from retail investors, particularly after Chewy co-founder Ryan Cohen took a huge stake in the company and now sits on its board. Investors have pinned their hopes on Cohen to push the traditional retailer in a more online direction.