GameStop shares soar 10% after the Reddit darling said it plans a stock split for the first time in 15 years
GameStopshares surged 10% on Friday after the video game retailer said it plans a stock split.
In an SEC filing late Thursday, GameStop said it intends to increase the number of outstanding Class A common stock to 1 billion from 300 million for two reasons.
One, the company wants to pay a dividend in the form of additional stock by splitting its shares. Two, the increased share count would be used to "provide flexibility for future corporate needs," it said in the filing.
When companies choose to implement a stock split, they are effectively increasing the overall number of outstanding shares and lowering the value of each individual share.
Stock splits have become a hot trend recently. Tesla said this week it plans to split its stock for the second time in two years. Google parent Alphabet and Amazon both announced plans for 20-for-1 stock splits this year, and stocks of all three companies surged after the moves.
GameStop shares were last up 10% at $183.75 a share, as of 9:40 a.m. ET.
After shooting higher during the Reddit-fueled trading frenzy last year, "meme stock" GameStop has since been associated with wild trading volatility. In mid-March, the stock dropped after the company reported a surprise loss during the holiday season.
But since chairman Ryan Cohen last week said he bought 100,000 shares in the company, GameStop has been on a tear — lifting the stock to a 40% gain in the last 30 days.
GameStop has split its stock only once before in March 2007, doubling every single share held by an investor in a 2-for-1 split.
It didn't specify the ratio by which it intends to split its stock now. It also didn't lay out the breakdown of the stock dividend that it intends to pay, nor of the funds it needs for other use.
Additionally, GameStop said it seeks shareholder approval for a new incentive plan to support future compensatory equity issuances. This possibly suggests selling more stock to investors.
Its stock dividend is contingent on final board approval, the company said.
Cohen's efforts to turn GameStop into the "Amazon of gaming" are yet to produce concrete results. Wedbush analysts say it continues to trade at levels that are "completely disconnected from the fundamentals" because of support from certain retail investors.
GameStop has yet to set a date and location for its annual shareholders' meeting, but it said these would be announced in a definitive proxy statement. GameStop's 2021 proxy was filed on April 22 last year.
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