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Is GameStop mania back following its stock split announcement?

January 2021 was undoubtedly a landmark month for investing, as retail investors rallied against powerful hedge funds and led an unprecedented short squeeze on GameStop.

A 1,500% rise in less than a month crowned the firm as the original meme stock, and the rest, as they say, is history.

This article was originally written by MyWallSt. Read more insights from the MyWallSt team here.

Are we in store for another meme stock surge?

GameStop [GME] and AMC [AMC] have been rallying recently, with both stocks up 75% and 47%, respectively, over the past 14 days. Many have begun to speculate that another trading frenzy similar to last year’s madness is on the way, particularly as both stocks retain high degrees of short interest.

Thursday saw GameStop announce plans to seek approval for a stock split at its next annual meeting — typically a bullish sign. Despite splits doing nothing to alter the true value of a company, research from Bank of America has shown that stocks that split gain 25% in the subsequent year against 9% growth from benchmark indices.

The reasons for this are largely unknown, but with an extremely volatile stock like GameStop hoping to cash in on that action, prospective investors could be in for a wild ride. The stock rose by as much as 19% in extended trading following the announcement on Thursday, showing how any news about the company can trigger significant volatility.

One of the reasons behind the split is likely a desire to make the stock appear even more attractive to retail investors, the driving force behind GameStop’s meteoric rise last year. Even though a split matters little in a world where fractional shares are commonplace, there are advantages to having a more affordable share price.

Will this stock split herald the beginning of the next meme stock revival? Unlikely. But we’re now sailing in uncharted waters, and it’s anyone’s guess as to what happens next.

 

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Disclaimer Past performance is not a reliable indicator of future results.

CMC Markets is an execution-only service provider. The material (whether or not it states any opinions) is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by CMC Markets or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person.

The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although we are not specifically prevented from dealing before providing this material, we do not seek to take advantage of the material prior to its dissemination.

CMC Markets does not endorse or offer opinion on the trading strategies used by the author. Their trading strategies do not guarantee any return and CMC Markets shall not be held responsible for any loss that you may incur, either directly or indirectly, arising from any investment based on any information contained herein.

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