We have split announcements from two companies that have been very much in the news lately — GameStop Corp. (GME) and Tesla (TSLA), notes Neil Macneale, editor of 2-for-1 Stock Split Newsletter.
GameStop Corp. (GME), which is splitting 4-for-1 on July 21, is known as a "meme stock". As defined by Investopedia, "a meme stock refers to the shares of a company that have gained a cult-like following online and through social media platforms." I wouldn't touch this stock with a ten-foot pole.
Tesla (TSLA) is the other popular stock in the news with a 3 for 1 split announcement. The split has to be approved at the August 4th shareholder's meeting and the date for distributing the split shares will be determined upon that approval.
TSLA is a little harder than GME to turn down, but not too hard. Tesla cars are great and I love that Tesla has paved the way for electric cars in general. However, the stock is way overvalued and the company is led by the mercurial and unpredictable Elon Musk. I just can't bring myself to get on board with this one.
That leaves us with Rex American Resources (REX), the only split announcement under consideration this month. Rex is an ethanol company, in the energy business, but without the baggage associated with oil, coal, or nuclear, etc.
Rex rates quite high on the valuation scale with a PE of 11.2, a price-to-book ratio of 1.2 and, amazingly, a pile of cash worth close to $40 per share. Rex does not pay a regular dividend but has been buying back its stock.
The big cash hoard might prompt the Board to consider additional stock buybacks or a special dividend. If neither of these options come about, the company could be seen as an attractive takeover target. Any of these three possibilities could benefit shareholders.
Volatility in the stock price has more or less matched that of the market but a temporary increase in volatility may be apparent in the days preceding and following the distribution of the 3 for 1 split coming up on 8/5/22. In summary, REX will be added to the 2-for-1 Index this month.
