A stock split announcement from GameStop has seen its price soar following a positive couple of weeks, but are meme stocks truly back?
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 (NYSE: GME).
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.
Are we in store for another meme stock surge?
GameStop and AMC have been rallying recently, with both stocks up 75% and 47% respectively over the last 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 indexes.
The reasons for this are largely unknown, but with an extremely volatile stock like GameStop hoping to cash in on that action, we 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 making 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.