GameStop has been on a wild ride this week, with shares in the videogame retailer pulled in opposite directions as investors react to news of a stock split and layoffs.
Following a 15% rally on Thursday, GameStop was down 5.5% in U.S. premarket trading on Friday, with the shares trading in a range of $114 to $135 since investors returned from the July 4 long weekend. It's a familiar pattern of trading for the volatile "meme" stock.
What's behind the move in GameStop?
For one, the group announced plans late Wednesday for a 4-for-1 stock split later this month, which will see shareholders of record as of July 18 receive three additional shares on July 21 for each share they own as a stock dividend.
That sent the stock shooting higher on Thursday. While a stock split doesn't make a company intrinsically more valuable, it has benefits, including making the shares more affordable to retail investors -- a class of traders that have come to define the company's behavior in the market.
The stock split was a catalyst to bid the shares higher, a familiar pattern that has recently been seen at other companies that have announced or executed stock splits, including Amazon $(AMZN)$, Shopify $(SHOP)$, and Google parent Alphabet $(GOOGL)$.
Less good news came late Thursday, when Barron's reported that the company's finance chief, Mike Recupero, would be leaving amid plans for corporate job cuts. After 600 corporate hires in 2021 and the first half of 2022, GameStop plans to "right-size" its head count across several departments with layoffs.
It follows the trend of some other companies, including Coinbase Global $(COIN)$ and Tesla $(TSLA)$, in trimming head count amid recession fears.
A decline in GameStop's share price Friday could be a sign that the stock-split optimism is wearing off, and some gains in price need to be given back. It could also indicate nerves among investors over the company's outlook, given the layoffs. Or, as always, it could be just another day of big swings in a volatile stock.
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