New York (CNN Business)GameStop shares will soon lose three quarters of their value. But don't worry: It's good news for stockholders.
The company announced Wednesday that its board approved a 4-for-1 stock split, effective July 22. Shares of the meme stock darling soared more than 8% in early trading following the news.
GameStop shares have fallen back to Earth following a Reddit-fueled spike last year. The stock is down about 16% this year, mirroring the broader market sell off.
For current GameStop ( shareholders, the overall value of their investment will stay the same, but they will own four times as many shares when all is said and done. )
Companies split their stocks for numerous reasons: Splits can put a stock's price within reach of smaller, individual investors, help companies increase liquidity and create more demand for a stock.
Although deep-pocketed institutional investors are typically unfazed by high share prices, individual investors might be turned off by sky-high price tags. The growth of zero-fee trading apps, including Robinhood, E-Trade and others, have helped made stock splits more attractive in recent years.
Several Big Tech companies also have recently announced stock splits to help boost affordability. Amazon's 20-for-1 split went into effect in June. Alphabet, which owns Google, also recently announced a 20-for-1 split. And Tesla announced a 3-for-1 split in June.
GameStop, like other meme stocks, is having a rough 2022. The stock plunged earlier this year, although it has battled back a bit recently. Many short sellers — investors who borrow shares and sell them in hopes of buying them back at a lower price — continue to bet big against these meme stocks, including GameStop and AMC. It's a risky strategy, though. If a shorted stock goes up from the price the short seller purchased it, the investor can lose a lot of money.
-- CNN Business' David Goldman contributed to this report.