Shares of GameStop Corp rose nearly 5% in premarket trading on Thursday after the video game retailer announced a four-for-one stock split in an attempt to revive retail interest that has waned amid a market selloff.
The stock was trending on stocktwits.com, a social media website popular among individual investors.
The move comes at a time when GameStop shares have slumped 20% this year, mirroring a slump in stocks that soared in the pandemic as fears of a recession slammed risk assets.
Along with AMC Entertainment Holdings Inc, GameStop was at the heart of a meme-stock trading phenomenon in 2021, when retail investors banded together on social media forums to punish hedge funds that had bet against the stocks.
Since then, retail investors have gravitated more towards index funds and technology stocks.
High-quality, large-cap names including broad equity exchange-traded funds, Advanced Micro Devices, Nvidia Corp are where the retail crowd is “seeking refuge against the growing recession concerns,” Vanda Research said in a note on Wednesday.
Shares of companies often run up after a stock split announcement as it lowers the per share price, boosting liquidity and making it more affordable for individual investors.
GameStop will join Amazon and Google-parent Alphabet in splitting its stock this year.
Russ Mould, investment director at AJ Bell, however, warned that stock splits do not change a company’s fundamentals.
“I wouldn’t at all be surprised to see more management teams embrace stock splits … to try and create fresh share price momentum, but over the long term, fundamentals will matter more than cosmetic issues such as this.”
GameStop first announced board approval for the share split in March. Stockholders at the close of July 18 will receive three additional shares for every GameStop share they own and split-adjusted trading will begin on July 22.
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