Tag: GameStop Dividend

Will GME Stock Split Force a Short Squeeze?

GME Stock Split

GameStop announced a GME stock split late March which should have received more attention than it did.

GME stock surged afterhours when the announcement was made public but failed to maintain its momentum as we’ve seen in the weeks since.

What will this split/dividend mean for shareholders and short sellers alike?

Let’s break it down together.

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GameStop announces stock split in form of dividend

GameStop stock split dividend

Let’s discuss what a GME stock split in the form of a dividend would mean for both shareholders and short sellers.

When GameStop first announced the stock split/dividend news, I published an article breaking down how a stock split and dividend essentially work.

You can read the article here for a more in-depth description on the two.

But no matter how you take it, one thing is certain.

The borrower of the stock is responsible for paying any dividends to the lenders.

Here’s what we can see happen before the split/dividend.

1. Continuous shorting in GME stock

I don’t expect short sellers to ease off shorting GME stock prior to a stock split or dividend.

Afterall, we are in a bear market.

So, the market sentiment overall continues to be on a downtrend.

In a recent article titled, “How close are AMC and GameStop to squeezing?“, I explain how a bull market will trigger massive price action in both these stocks.

Primarily because the market sentiment during this time will be sending share prices upward.

Shorts will have to close to their positions to profit from this bear market, or face riskier bets on the way up.

So, while the GME stock split is bullish in nature, stocks are being kept in line due to the bearish course of the markets in general.

2. Gamma prior to approval of stock split/dividend

GameStop’s stock split/dividend still has to be approved by the board and shareholders.

The game retailer merely announced the move; however, it must undergo the approval process.

You can bet short sellers will be on a ticking time bomb before this process goes into full effect.

You see, the lender is going to want their dividend.

If you short sellers don’t want to pay this dividend to the lender, they’ll have to return the shares they borrowed in the first place.

This is where we can expect to see big gamma occur prior to GME’s stock split becoming official.

What will happen if shorts don’t deliver borrowed shares before stock split?

If GameStop’s price surges, shorts will accrue greater losses and the lender will still require shorts to pay back that dividend.

Any dilution from a stock split won’t necessarily affect short sellers, but if a dividend is approved then shorts will have to pay that dividend to the lender.

The issue of a stock split/dividend has often been seen as bullish.

Shorts betting on this play could be exposing themselves to very big risks.

Will a GME stock split or dividend expose naked shares?

There’s this concept floating around that a GME stock split or dividend yield will expose many more shares are circulating the market than there are in existence.

I can’t speak too much on this, but I would love to know your thoughts on this below.

It’s an interesting concept that would essentially unveil millions to billions of synthetic shares.

The premise behind this concept is to expose the shares and get short sellers to close every single share, resulting in a GameStop MOASS (mother of all short squeezes).

Leave your thoughts in the comment section of the blog.

What will this move mean for shareholders?

GameStop shareholders will be able to vote on this GME stock split/dividend.

A stock split will dilute the float providing shareholders with more GME stock shares at a lower price.

An approved divided will yield quarterly or yearly compensation for holding the stock.

It’s extremely bullish if you’re a shareholder and believe in the company’s long-term vision.

GameStop and Loopring just launched their beta NFT marketplace last month.

The company is evolving into a tech company with its ecommerce foundation and use of blockchain technology, which we will see more of in the metaverse without a doubt.

GameStop is adapting to the use of new technology for the future of gaming and I’m excited to see this space evolve.

I’d love to hear your thoughts.

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GameStop Announces Stock Split in Form of Dividend

GameStop Dividend
GME Stock Dividend – GME Stock Split – GameStop announces dividend and stock split

GameStop is planning a stock split in the form of a dividend, but shareholders will have to approve this plan at the upcoming 2022 annual meeting.

The game retailer filed a form 8-K with the SEC laying out the plans for this stock split and dividend.

The news has the retail community cheering on the plan but leaves curious investors with a few questions.

Be sure to bookmark this page for updates.

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Welcome to Franknez.com – if you haven’t joined the newsletter, be sure to do that below. I’m publishing market news and updates daily.

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How will a GameStop Dividend work?

GameStop Dividend
Source

GameStop plans to increase the number of authorized shares of Class A common stock from 300,000,000 to 1,000,000,000 in order to implement a stock split of the Company’s Class A common stock in the form of a stock dividend.

The stock soared more than 14% after hours moments after the announcement.

Several call options within $170-$190 are in the pocket to fuel massive gamma squeeze for Friday’s rally.

To say GME shareholders are excited is an understatement.

But GameStop shareholders aren’t the only ones who are excited.

The entire ‘meme stock’ crowd is happy to hear the news as most upswings have been in synchronicity with both GameStop and AMC.

GME stock is up more than 16% after hours while AMC which also closed red today is up more than 5%.

What type of dividend GameStop unveils is yet unknown, but a dividend usually comes in the form of monthly, quarterly, or annual compensation.

Investors are even speculating an NFT dividend could be underway.

However, this is a developing story so be sure to join the newsletter for immediate updates.

How does a stock dividend work?

GameStop dividend

Stock dividends pay shareholders a percentage from a company’s profits every month, every quarter, or annually, depending on the terms.

Shareholder will have two options when receiving stock dividends.

  1. Cash out the dividend during every payment cycle
  2. Reinvest the dividend back into the stock to accumulate more shares over time

If GameStop offers shareholders a traditional dividend (non-NFT), then shareholders will be able to use one of these two options.

How much investors earn every month, or every quarter will depend on how many shares an investor holds and on GameStop’s dividend yield.

The more shares of a company an investor holds means the more dividend yield is accumulated over a period of time.

A GameStop dividend could provide shareholders with a stream of passive income like most dividend stocks do.

Long terms stockholders tend to reinvest that dividend so that the number of shares they own compound over time, creating a snowball effect of increased value assets.

This is what Warren Buffett refers to as value investing.

So, how does a stock split work?

GameStop Stock Split

A stock split takes a share and splits it into two or more shares, dividing the share price by the number of splits.

For example, Amazon just announced a 20-1 stock split.

This means for every share you own of AMZN stock you will receive 20 more shares when the stock splits.

AMZN stock is worth roughly $3,200 today.

If the stock split today and you only owned 1 share of stock, you will now have 20 shares each worth $160.

Owning 2 shares of AMZN stock would give you 40 shares valued at $160.

Tesla and Apple had stock splits earlier last year too.

GameStop’s stock split ratio is still unknown, but I will cover it as more information from the company is released.

What is the purpose of a stock split?

A stock split allows investors to purchase a company’s stock at much more affordable price.

Especially after a stock’s share price has surged to relatively high numbers.

Going back to Amazon as an example, while $3,200 per share is not feasible for most small investors, $160 per share incentivizes retail investors to buy the stock at a much lower entry point.

A GameStop stock split too could allow retail investors to buy the stock at a much lower price.

GameStop stock split explained

The company wants to increase the number of common stocks in the market from 300,000,000 to 1,000,000,000 to provide that capital to its shareholders in the form of a dividend.

So, it’s possible we don’t even see a traditional stock split (unless announced by GameStop).

The information we have available at the moment points towards this ‘dilution’ so-to-speak as a form of payment to GameStop’s shareholders in the form of a GameStop dividend.

GameStop’s board of directors has approved both stockholder proposals, but the stock dividend will be contingent (subject to change) on the final Board approval.

What does a GME stock dividend mean for short sellers?

The news of a GME stock dividend means retail investors will flood the market to buy GameStop, causing short sellers not only lose a lot of money, but to close their positions.

What happens to a short seller when a company announces a stock dividend?

If the stock is short on the record date, they will owe the dividend to their broker.

At this point a GameStop short squeeze is inevitable.

Shorts will be forced to buy back their shares to pay their brokers the dividend they’re entitled to once this proposal is executed, or they have the chance to close their short positions now before accumulating greater losses in the future.

Either way this plays out, short sellers are not in a good position right now.

Is GameStop a buy right now?

franknez.com

GameStop might be a little pricey at the moment, but investors buying in for a short squeeze have a chance at making a lot of money in the near-term future.

Are you a GME shareholder?

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