GameStop stocks going down soon

The company announced Wednesday that its board of directors has approved a 4-for-1 share split effective July 22. Shares in the beloved meme stock rose more than 8% in early trading after the news.

GameStop shares have fallen to zero after last year’s Reddit-fuelled surge. Shares are down about 16% this year, reflecting a broader selloff in the market.

For current game stop (GME) shareholders, the total value of their investment will remain the same, but when all is said and done, they will own four times as many shares.

Companies split their shares for many reasons: a split can make the share price affordable to smaller individual investors, help companies increase liquidity, and create more demand for shares.

While wealthy institutional investors are not usually put off by high stock prices, individual investors can be put off by sky-high price tags. The rise of zero-fee trading apps, including Robinhood, E-Trade, and others, has helped make stock splits more attractive in recent years.

Several big tech companies have also recently announced stock splits to boost affordability. The Amazon 20 to 1 split went into effect in June. Alphabet, which owns Google, also recently announced a 20-to-1 split. And Tesla announced a 3 to 1 split in June.

GameStop, like other meme promotions, is having a tough 2022. Shares tumbled earlier this year, although they have bounced back a little lately. Many short sellers—investors who take stock and sell it in hopes of buying it back at a lower price—continue to bet big against these meme stocks, including GameStop and AMC. However, this is a risky strategy. If short stocks go up at the price the seller bought them for, the investor could lose a lot of money.

– David Goldman of CNN Business contributed to this report.