Four-for-One Stock Split is GameStop’s Latest Ploy to Remain Relevant
After being brought back from the dead courtesy of the Apes on the Wall Street Bets subreddit during meme stock mania, video game retailer GameStop has been searching for a way to justify its sky-high valuation.
Despite plummeting more than 60% from its 2021 highs, GME stock still sports an $8.9 billion market cap (over 6x revenue), with the unprofitable GameStop just unveiling its latest ploy in a four-for-one stock split.
GameStop’s (NYSE: GME) management, seeking to take advantage of its newfound momentum, decided to jump on the Non-Fungible Token (NFT) bandwagon by creating its own NFT trading platform. The move seems to signal that the company’s primary video game sales business is no longer viable in the age of digital downloads. Now, GameStop will increasingly rely on video game-adjacent memorabilia through its physical stores and NFT platform to drive revenue growth.
Management probably did not plan for the swift downfall of the NFT market. Once the realization that is owning an NFT doesn’t mean much of anything reached critical mass, the entire market went into free fall. Existing investors began to sell their assets and exit the industry entirely, while prospective new entrants steered clear. At least for now, NFTs will remain an incredibly niche industry.
Which leads us to GameStop’s stock split. The company initially filed notice with the SEC in April, once the NFT bloodbath was already underway. Likely knowing their NFT platform would be a dud (it’s still not live at gamestop.com), management pivoted to the tried and true stock split to buoy a fading stock price. The four-for-one split will take effect after the bell on July 18th.
Whether a stock split can make up for a dying business or the failure to launch its Plan B remains to be seen.
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Disclaimer: Wealthy VC does not hold a position in any of the stocks, ETFs or cryptocurrencies mentioned in this article.
