GameStop (GME) is riding the fashionable financial wave of stock splits.
The struggling video game chain plans to ask its shareholders, at its next shareholder meeting, to vote on a proposal allowing the company to split its stock.
Concretely, GameStop wants to increase the number of Class A common stock from 300 million to 1 billion to implement a stock split in the form of a stock dividend, according to a SEC filing.
GameStop did not provide further details. The company does not for example spell out the mechanism of this split, like the ratio, in the form of a stock dividend.
It's also unclear when GameStop will release its definitive proxy statement and when and where it will hold its annual meeting.
"The Company’s definitive proxy statement relating to the annual Meeting will include additional details regarding the Charter Amendment and the 2022 Equity Plan, as well as the record date, date and location of the annual meeting," GameStop said.
Shares soared more than 15% in after-hours trading, adding more than $1.1 billion market value, despite these unknowns.
GameStop explained, for example, that the transaction will "provide flexibility for future corporate needs."
"The stock dividend will be contingent on final Board approval," the meme stock company concluded.
Recent announcements of stock split plans and proposals have been rather successful to the companies in question.
Splitting your stock can make the value of the stock go up. Stock splits can spark big rallies as retail traders pile in, according to experts.
Tesla's (TSLA) shares jumped 8% last Monday after the carmaker said it was planning a second stock split in less than two years. Amazon (AMZN) gained more than 5% the day after announcing a 20-for-1 split this month.
Still no Clarity on Gamestop's Turnaround Plan
GameStop is still struggling to turn around the bad situation in which its core business is because video game players are downloading games directly to their Xbox or PlayStation consoles. Few still buy the physical games.
"The first year of our transformation was about starting to turn GameStop into a customer-obsessed technology company, one that has wider offerings, more competitive pricing, faster shipping, stronger customer service, and an easier shopping experience," said CEO Matt Furlong during the company's fourth-quarter earnings call.
The firm wants to get into non-fungible tokens (NFTs) -- a way of owning a piece of digital content, be that a photo or a gif-- related to its video game products, following a tie-up with Australian blockchain startup ImmutableX last month and the launch of a dedicated website last year. It plans to launch its NFT marketplace by the second quarter of the current fiscal year.
But the NFT sector, which generated a lot of buzz at the start of the year, seems to be cooling off.
The company has yet to fully articulate its new strategy and has largely kept its post-earnings updates limited to a brief statement on customer trends and the state of its balance sheet.
GameStop stock got a big boost this month when chairman Ryan Cohen, who cofounded pet-supply retailer Chewy (CHWY), bought 100,000 shares of the video game retailer, bringing his ownership to 11.9%.
GameStop is up more than 12% since the start of the year.
The Grapevine, Texas company posted an adjusted net loss of $141 million, or $1.86 a share for the quarter ended January 29.
Sales rose 6% to $2.25 billion from $2.12 billion in the same period a year ago.
