Those who noticed a recent increase in the value of GameStop shares probably thought Reddit was behind it again. However, that’s not the case. This time the surge is more organic and comes after the video games retailer announced a stock split.
GameStop’s board voted in favor of a 4-for-1 stock split on Wednesday. The decision won’t affect the value of the investment for the current shareholders, but the number of their shares will increase in a way that they’ll receive three extra shares for every share they now own. On the other hand, owning GameStop stock (GME) will become much easier for the new investors as the shares will be four times cheaper. The stock split will become effective on July 22.
GME closed at $117.43 on Wednesday before surging to $134.81 at one point following the stock split announcement. It later settled at 133.76 in extended trading, which marked a 14% daily increase.
Stock splits have recently become quite a popular trend, especially among tech companies. For example, e-commerce giant Amazon and Google’s parent company Alphabet had 20-for-1 splits in June while electric car maker Tesla announced a 3-for-1 stock split earlier this year. There are several reasons why companies decide to do a stock split, but probably the most common one is to make shares available to individual investors and increase the demand.