What happened
Shares of GameStop (GME -0.97%), the video game retailer, skyrocketed briefly this morning after the company said in a regulatory filing yesterday that it was planning to boost its share count and implement a stock split.
Investors were apparently very enthusiastic about the potential for an upcoming stock split and pushed GameStop's share price up by as much as 14% this morning and were up by 3.1% at 11:09 a.m. ET.
So what
GameStop's management said in the filing that the company wants to increase its amount of Class A common stock from 300 million shares to 1 billion and use the additional shares to implement a stock split "in the form of a stock dividend" as well as to "provide flexibility for future corporate needs."
Image source: Getty Images.
The potential stock split will need stockholder approval at the company's next shareholder meeting, but investors immediately jumped on the stock in anticipation of a share price split.
Some investors like the idea of a stock split because a lower price for an individual share -- after a split -- can theoretically allow more investors to afford the stock. But with the prevalence of fractional investing, it's easier than ever for investors to buy shares of nearly any publicly traded company.
It's also worth pointing out that while investors often get excited about a stock split, it doesn't change the overall value of a company's outstanding shares.
Now what
GameStop's stock has become a so-called meme stock over the past couple of years, as some investors have used social media platforms to organize big movements into the stock.
Today's share price jump is the result of investors being overly excited about a potential GameStop stock split and the fact that the meme stock is often very volatile based on the whims of a small group of investors.
All of which means that long-term investors may do well to steer clear of GameStop right now and not get caught up in the hype.
