It has been a volatile four months for GameStop’s (NYSE:GME) stock since the company announced its planned stock split on March 31. The stock split is to take place at the close of Thursday July 21.
On March 31, GameStop disclosed plans to carry out a stock split by boosting its share count from 300 million to 1 billion. A stock split does not necessarily increase a company’s market capitalization, but it makes a stock more attractive and more affordable for small investors.
At the time of the announcement, GameStop said the move would “provide flexibility for future corporate needs.” What these corporate needs are, remain a mystery, with some analysts criticising the stock split as a move to revive fading interest.
The plan secured board approval on July 6 and on Monday, July 18, shareholders will receive three additional shares for each of their class A share, which will be distributed after the close of trading on July 21.
In the four months since the announcement of the split, GameStop’s stock has fallen to as low as $77.77 on May 12, and to as high as $153.00.
On Friday, the company closed 4% higher on the New York Stock Exchange, and 3.5% higher on the following Monday at $146.64, an almost three-month high.
Based on its closing price on Monday, the split would mean that GameStop’s share price would only cost around $36.
GameStop’s move follows that of tech heavyweights like Apple (NASDAQ:AAPL) and Tesla (NASDAQ:TSLA), which enacted stock splits in 2020 and new stock splits by Alphabet (NASDAQ:GOOGL) and Amazon (NASDAQ:AMZN) this year.
The need for Alphabet and Amazon stock splits were as expected as their share prices have hovered around $3,000 in recent months.
But for GameStop, some financial watchers have questioned the company’s intent to do a split as its financials are failing to keep up with its stock price. In the fiscal year ended Jan. 29, GameStop incurred a net loss of $381 million, up 77% from its $215 million loss in 2020. That is despite revenue climbing to $6.01 billion from $5.09 billion.
There have also been concerns that GameStop may be going out of business as the company had announced store closures and booked millions of dollars in debt.
In its most recent earnings report, however, the company’s first-quarter revenue beat market estimates, which some have attributed to its shift towards a more online-focused model. The company had earlier disclosed plans to foray into non-fungible tokens or NFTs by the end of the second quarter of fiscal year 2022.
The plan has raised some eyebrows from market watchers including Wedbush analyst Michael Pachter, who described the move as “nonsense,” saying it will "have no NFTs for sale and no customers, and wallets they are providing will be empty."