(Bloomberg) — A proposed stock split by GameStop Corp. brought back echoes of peak-meme mania days to trading forums on Friday, with investors snatching up shares in the company and other retail favored-names.
The video-game retailer jumped as much as 14% in New York before erasing gains to trade close lower Friday after it said it will ask shareholders to approve a plan to increase the number of Class A shares to 1 billion from 300 million. The proposal, if approved, will open up a flood of GameStop shares with lower price tags — a combination highly favored by retail investors, who tend to concentrate bets on lower priced names.
The action on Friday showed the group didn’t waste any time with GameStop being the most bought stock on Fidelity’s platform in the session. Its buy orders were nearly double those for the next most-active company, Advanced Micro Devices Inc. Over 13 million GameStop shares changed hands, more than double the average volume over the past month.
Excitement was palpable in popular forums like Reddit’s WallStreetBets and chatroom Stocktwits where it was trending. Fellow meme stock AMC Entertainment Holdings Inc. also saw a boost in retail trader sentiment as Fidelity users snapped up shares.
GameStop’s split plans follows similar moves that bolstered the stock prices of technology giants Amazon.com Inc. and Tesla Inc. in recent weeks.
Lucas Mantle, a data scientist at Vanda Research, expects retail investors to keep aggressively buying GameStop in the coming weeks if the announcement is anything like those issued by Tesla. However, he warned that retail enthusiasm for stocks that have announced splits tends to wane closer to the actual stock split date.
Wedbush analyst Michael Pachter concurred. “Instead of a medium pizza cut into four slices, they are cutting it into six. The pizza is the same, but each slice is smaller and costs more,” he said in an email.
While the revival stands out compared to the broader market, a basket of 37 meme stocks tracked by Bloomberg is up more than 35% from a March bottom, it has yet to match some of the swings seen in 2021 when stocks such as GameStop almost tripled in a single session. GameStop capped a four-day slide Friday, but has soared 82% in the past two weeks.
“I wouldn’t at all be surprised to see more management teams embrace stock splits, in some cases perhaps quite cynically to try and create fresh share price momentum,” Russ Mould, investment director at AJ Bell said, adding that over the long term fundamentals will prevail.
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