Potential new share price, same meme stock

This is usually the big news when a company announces a stock split, but when that company happens Gamestop Corporation (NYSE: GME) Get things straight crazy.

Depositphotos.com contributor / Depositphotos.com – Marketbit

Shares of wildly popular meme stock bounced back to $ 200 on April 1 after Gamestop announced plans to seek approval for a stock split. While April Fools’ Day was not a joke, retailers were delighted with the headline: This was another reminder of the unequal market reaction that meme stocks could create.

If the board approves the idea, Gamestop won’t split for the first time. Fifteen years ago, the company opted for a conventional 2-to-1 split after climbing to an all-time high. Me, how things have changed.

What did the stock take then and now is going on day and night. Sales of Xbox gaming consoles and Super Mario Bros. games are slightly more important these days. Instead, it is social media that indicates when Gamestop trading goes into overdrive. The latest catalyst is causing more of the same.

Why is Gamestop splitting stock?

In addition to awakening its enthusiastic retail shareholder base, Gamestop is on a split route to make its stock more affordable. This is often argued when other companies split up, but with Gamestop it carries special meaning.

Following the well-publicized frenzy around the stock after the stock moved to $ 483 in January 2021, GameStop management realizes that it is its loyal retail trading cadre that transfers its stock – not the fundamentals of the company. By lowering the share price, it is expected that Gamestop will be able to recruit more Reddit and Discord affected traders into the army. Instead, the company’s value will theoretically increase as more piles of meme stock.

Gamestop is taking a slightly different approach from the general stock split. Instead of issuing new shares to investors, the split will take the form of a ‘dividend’. Not a cash dividend, but a stock dividend which means shareholders will receive more shares on a certain cutoff date. As a result, the number of outstanding Class A shares will increase from 300 million to 1 billion.

It’s not really different from other divisions, it’s a clever marketing ploy to position it as a ‘dividend’ so that shareholders feel they are being rewarded with some sort of reward. Of course, a company that posted a $ 147.5 million fourth-quarter loss doesn’t have much cash to transfer.

How are meme stocks performing in 2022?

Further proof that there is an ETF for everything these days, the Roundhill Meme ETF is a multi-company meme play that has become one. This is the index that tracks the Selective Roundhill Mem Stock Index, perhaps our best guide to mem stock performance.

Although the rise of meme stocks began in the early days of the epidemic, the Roundhill meme index began on December 8 last year. Since then, it has dropped by about 30%. Year-to-date meme group has -23% return.

The meme trade has shown signs of life in recent weeks. Since March 14th, the equivalent weighted index has risen 25%, leading to no increase of 111% in anything other than GameStop. Major changes to Affirm Holdings, AMC Entertainment, and DoorDash have led to recent meme stock charges.

Does it make a purchase to Gamestop stock?

So while Gamestop’s SEC filing says stock split aims to give it “flexibility for future corporate demand”, in reality it’s another strategy to entertain its enthusiastic investor base.

Like other stock splits, this move will have no effect on valuations. There will be more shares flying around at lower prices. General corporate practice, however, artificially increases value when new investors bid as less expensive shares.

With GameStop, the news of an approved split could very well spark an assembly. It doesn’t take much to excite meme stock traders. Those who think they are too late to the party can jump. Existing shareholders, especially those in red, may take psychologically motivated steps to buy “cheap” shares.

A near-term gain in terms of GameStop split chatter seems commendable for traders looking for a seemingly meme stock revival. Of course, even short sellers will likely be attracted to the noise to capitalize on another period of sensitively driven trading. And if GameStop’s 20% float is kept short, the stage could again be set for a high-risk squeeze game of cat and mouse.

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