Thursday morning brought a measure of confidence to Wall Street, as investors liked signs that the worst of inflationary pressures might be behind them. With oil prices having fallen below the $100 per barrel mark, it's at least possible that a pullback in prices at the pump could bring a month or two of lower increases in the U.S. consumer price index, which in turn could ease fears of sustained and entrenched inflation. As of 8 a.m. ET, futures contracts on the Dow Jones Industrial Average (^DJI 0.31%) had climbed 113 points to 31,126. S&P 500 (^GSPC +0.29%) futures had moved up 11 points to 3,859, and Nasdaq Composite (^IXIC +0.89%) futures had given investors a 47-point bump to 11,928.
For a year and a half now, individual investors have focused much of their attention on GameStop (GME +6.33%). The pioneering retailer specializing in video games and related accessories had fallen on hard times, but plans to reinvent itself as a video game-centered e-commerce specialist ignited the dreams of retail investors and sent shares soaring. Despite huge swings, GameStop stock has held onto a huge portion of its gains, and the company just gave investors another positive sign of its confidence in its long-term future.
GameStop joins the stock-split stock ranks
Shares of GameStop climbed more than 5% on Thursday morning. Investors reacted positively to the company's announcement that it would split its shares.
GameStop's board of directors announced late Wednesday that it had approved and declared a 4-for-1 stock split of the company's common stock. Formally, the stock split will take place in the form of a stock dividend, under which shareholders will receive three additional shares of stock for every share they own as of the record date of July 18.
The new shares resulting from the stock split should appear in shareholders' brokerage accounts after the close of trading on Thursday, July 21. Starting the next day, July 22, investors will have an opportunity to trade GameStop shares on a post-split basis.
NYSE: GME
Key Data Points
GameStop's press release didn't give any justification for the split. With the stock price having remained above the $100 per share mark, however, the move isn't inconsistent with how many companies have reacted, especially those for whom offering continuing access to individual investors is important.
Will other meme stocks follow?
As is always the case with stock splits, there won't be any fundamental change to GameStop's business prospects as a result of its latest move. Investors will simply own four times as many shares as they do now, with each share likely to be worth roughly one-quarter of what shares currently cost.
However, investors have come to see stock-split announcements as a vote of confidence from company leaders. Few companies announce stock splits when they believe the share price is likely to decline in the near future. GameStop remains optimistic about its restructuring initiatives and their future impact on the video game specialist's longer-term business performance.
It's unlikely, however, that GameStop's move will lead to a bunch of other meme stocks following suit. The reason is simple: None of the other top meme stocks have share prices that justify a split. AMC Entertainment Holdings shares fetch less than $13 right now. Several others, including BlackBerry, Virgin Galactic, and Clover Health, have fallen to single-digit share prices. Indeed, it's possible that some meme stocks might have to do reverse splits in order to lift their share prices to more sustainable levels.
GameStop has defied the odds, and investors remain confident in its strategy. The video game retailer still has a long way to go, but its stock split announcement has shareholders excited once again about its future.
