Insights

Why GameStop Is Down for the Third Day After Its Stock Split

What happened

Shares of GameStop (NYSE: GME) are falling 3.2% at 11:10 a.m. ET on Tuesday on no company-specific news. Walmart‘s profit warning yesterday spooked the market, and the Dow Jones Industrial Average and S&P 500 are both lower, though each is down less than 1%, respectively.

Tuesday also marks the third consecutive trading day since GameStop split its stock that its shares have fallen. Stock splits are often seen as bullish indicators and the video game retailer’s investors were hoping it would spur a big surge in price to trigger a short squeeze. That hasn’t happened.

So what

The prospects for a recession weigh on retailers everywhere, but GameStop is already a troubled company that’s been trying to turn its business around. The video game retailer has leaned heavily into the cryptocurrency market by launching a non-fungible token (NFT) wallet as well as an NFT marketplace where the tokens can be bought and sold.

Unfortunately for GameStop, its timing was off as the crypto and NFT world is going through a collapse that’s being characterized as a “crypto winter.” Valuations and volumes have tumbled sharply making it difficult for GameStop’s efforts to offer any meaningful contribution.

Now what

The video game retailer’s 4-for-1 stock split is not going the way traders had hoped. The stock began trading at its new lower share price last Friday and it’s lost over 14% of its value so far.

GameStop shares remain heavily shorted — about one-fifth of the outstanding shares are sold short — but the fundamentals of the company’s business seem to be taking precedence now. As a meme stock, GameStop shares often are traded based on the volume of social media mentions, but in a worsening economy, it really comes down to whether the company can perform, and right now there’s no indication the video game retailer is heading in the right direction.

Rich Duprey has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Walmart Inc. The Motley Fool has a disclosure policy.

Trade The World Anywhere & Anytime!

Mobile app platform with over 50,000 global listed securities across 12 markets (over 70% global market capitalisation), right from your Android or iOS device.

Integrated with exclusive trading idea and investment analysis tools to help you find actionable insight on virtually every financial instrument across our 12 global markets, to help you optimise your trading strategies.

Refer Your Friends

Tell your friends about Monex and gift them FREE access to our trading tools.

  • This field is for validation purposes and should be left unchanged.

We respect your privacy and will only send this one email notification to your friends. 

Share With Your Friends

Rebate Rewards

Level 2 Rebate

Deposit $2,000 and get $200 Rebate
$ 200 Rebate
  • 3 Simple Steps
  • 1. Register Using The Link Below (Promo-Code: WEBREBATE)
  • 2. Deposit $2,000 and place one trade at any non-Austalian market within 30 calendar days
  • 3. Receive Your $200 Rebate
Popular

Level 1 Rebate

Deposit $1,000 and get $100 Rebate
$ 100 Rebate
  • 3 Simple Steps
  • 1. Register Using The Link Below (Promo-Code: WEBREBATE)
  • 2. Deposit $1,000 and place one trade at any non-Austalian market within 30 calendar days
  • 3. Receive Your $100 Rebate

Monex Trading Tools Access and Usage Terms

The Monex Trading Tools (referred to as ‘tools’ hereafter) are available to you inside your client portal;

To activate access to the tools, you must have a verified and approved trading account and have made a deposit of at least AUD $1000.

An active and funded account with a positive trading balance is required to continue to have access to the tools;

Although the tools are available to you, Monex Securities may at it’s discretion disable access to the tools in the future;

Monex Securities reserves the right to change these terms and conditions from time to time, as it sees fit, without notice.

EASY QUALIFICATION & LOW ENTRY
NEW CLIENT REBATE OFFER
EARN UP TO $200 CASH REBATE
Act Fast - Promotion Ends In
Click Here To Get Started
EASY QUALIFICATION & LOW ENTRY
NEW CLIENT REBATE OFFER
EARN UP TO $200 CASH REBATE
Act Fast - Promotion Ends In
Click Here For More Info