New York (CNN Business)GameStopStocks will soon lose three-quarters of their value. But don't worry. That's good news for shareholders.
On Wednesday, the company announced that its board of directors had approved a 4: 1 stock split on July 22nd.
GameStop's share price has returned to Earth following last year's Reddit-fueled surge. This year's stock price has fallen by about 16%, reflecting the growing market sellout.
Companies split their shares for a variety of reasons. The split keeps the price of the stock within the reach of small private investors, helping companies to increase liquidity and increase demand for their stock.
Well-financed institutional investors usually don't suffer from high stock prices, but individual investors can be turned off by very high price tags. The growth of free trading apps, including Robin Hood, E-Trade, etc., has helped make stock splits more attractive in recent years.
GameStop, like other meme stocks, is showing a rough move in 2022. We've hit back a bit lately, but stocks plummeted earlier this year. Many short-selling stocks (investors who borrow stocks and sell in the hope of buying them back at a lower price), such as GameStop and AMC, continue to make big bets on these meme stocks. However, this is a dangerous strategy. Investors can lose a lot of money if shorted stocks rise above the price purchased by shortsellers.
--David Goldman of CNN Business contributed to this report.
