When Amazon (AMZN) knew that markets would react negatively to weak quarterly results, the firm announced a stock split and stock buyback. Tesla (TSLA) did not need to do so but it, too, announced a stock split, sending shares higher.
GameStop (GME) posted poor holiday quarterly revenues in its last report. Had Ryan Cohen not announced he bought shares, GME stock would have continued its plunge to the $50 - $60 range. Helped by buying momentum from the Cohen buying news, GameStop capitalized on it. It announced a stock split plan that would increase the share count while lowering the stock price.
The increased share count improves stock liquidity. It should also attract more retail investors. GameStop’s split does not change its fundamental valuation. Markets would have sent the stock lower, had Nasdaq’s correction continued. Fortunately, GameStop has an incredibly stubborn buying base that will never sell the stock.
Short-sellers will suffer the most. The short float was 20%. The risk for further losses rises as the media intensifies coverage of the GME stock rally.
Cautious investors who are uninterested in trading TSLA, AMZN, or GME stock should treat the stock split as a negative signal. This could mark the top. The Fed removed an accommodative money-printing policy. This will hurt speculative stocks the most.
