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GameStop shares are down over 23 percent so far this year. However, now the company plans to supercharge the bullish sentiment around the stock by approving a stock split in the form of a stock dividend.
GameStop’s press statement notes:
“Company stockholders of record at the close of business on July 18, 2022, will receive a dividend of three additional shares of the Company’s Class A common stock for each then-held share of Class A common stock. The stock dividend will be distributed after the close of trading on July 21, 2022. Trading will begin on a stock split-adjusted basis on July 22, 2022.”
As a refresher, a stock split occurs when a company grants its existing shareholders additional shares based on a pre-approved multiple. The stock price is adjusted accordingly so that the overall value of investors’ position is not affected. Consequently, on a theoretical level, a stock split does not affect the portfolio value of investors, with the move entailing only ancillary benefits such as improved liquidity.
A stock split also conveys to investors that the price of a particular stock has registered sizable gains and that this trend of outperformance will likely continue for the foreseeable future. It is this psychology that prompts share price gains in the aftermath of a stock split. It is for this reason that GameStop investors have responded positively to this development. As an illustration, GameStop shares are up over 4 percent in today’s after-hours trading session.
Meanwhile, GameStop investors are also keeping an eye on the company’s Web3 push. On the 23rd of May, GameStop launched the beta version of an Ethereum-based and browser-supported digital wallet that would allow users to conveniently send, receive, and store cryptocurrencies (ERC-20 tokens and Ethereum) as well as NFTs. Crucially, this digital wallet offering is meant to complement GameStop’s upcoming NFT marketplace, allowing the retailer of video games to become a full-fledged Web3 platform that seamlessly connects gamers with content creators and video game publishers via the monetization of in-game digital assets through NFTs.