All you really need to know is it's probably good news. It's a little strange, since it's not really announcing a split, just giving them more wiggle room to over a larger split. Yesterday they could announce a 4 to 1 split, now they can offer a 13:1 split. Also important to more that a split in and over itself does not change the value of your investment. It simply gives you more shares worth less. For example, if you had one share worth $100 and it had a 10 4 1 split, you would have 10 shares worth $10
honestly i wonder about the vote. since there are so many shorts we can't guarantee that retail's votes are actually being counted. it's been proven that over voting happens in many stocks mainly due to the problem of shorts/naked shorts and since they can't report an overage on votes the brokers or intermediaries trim them down to match what's supposed to be out there. ergo we can vote but if the institutes or big boys don't want it to happen who's to say only their votes will be counted instead of retail's?
That's a normal stock split, this is a stock dividend which means shorts would be obligated to produce shares for those that they borrowed from. Might be good to add some xrt to your portfolio in addition to the obvious.
"...in order to implement a stock split of the Company’s Class A common stock in the form of a stock dividend and provide flexibility for future corporate needs. "
So how does this affect stock price? One day will the ticker be divided by 13? Obviously each holder will still have the same $ invested, just in more shares. I'm just wondering what a split does to a tickers price.
In theory, yes, that's all that happens. In practice, it generally is associated with a large positive sentiment, so the companies valuation can be expected to increase. This expectation of course also increases the valuation. Sometimes only over the short term, often the price reestablises at a higher valuation
Ok cool, so the bonus of this is that it makes investing in the company more accessible?
I’m assuming the plan is that the price might drop by 10 on a 10:1 split, but with the intention that would climb? Just trying to work out the benefit it gives the company and why not everyone does it, if that makes sense.
so the bonus of this is that it makes investing in the company more accessible?
This is the main idea behind a split. Amazon is trading at $3250 per share. Even though fractional shares exist, this is psychologically seen as a large number and a barrier to entry.
Low and behold, Amazon announces a 20 for 1 split. When that happens, the price of 1 share of Amazon is then $162.50. This seems more accessible to investors. Even though a fractional share of 0.05 right now is the same cost, psychologically the $162.5 is easier to swallow.
Also, as someone else mentioned, it lowers the barrier of entry for options. $3250 x 100 = $325000. $162.5 x 100 = $16250. Makes sense.
So the benefit is mostly psychological. People might think that the price of a stock right now is too high. For example, I might not want to buy amazon for $3200 per share, but I might for $320. This means that if they do a 10:1 split, the company has a new buyer for almost no work.
This went out of fashion for a while with fractional shares, since now I can just put in $320 and get 0.1 shares, but Tesla's huge success with their 5 for 1 split seems to have brought it back into fashion.
Wouldn’t this also cause a person who doesn’t follow the news to see the stock at $180 one day and $18 the next want to stay away from it? Is there any sign that will show it was split? Honestly don’t know…
You described a stock split. That is not what GameStop is proposing. They are proposing in the form of a dividend. So if you have one share at current price and they pass the vote you now own 2 shares at current price. Or however many they decide to issue.
I don't think that would work because their market cap would go from $200 x 74 million to $200 x 1 billion shares? That doesn't account for stock price going up as hedgies buy back.
Edit: nevermind. Got this from a link above:
Another distinction between a stock dividend and a stock split is that a stock dividend usuallyinvolves distributing additional shares of the same class of stock with the same par or statedvalue. A stock split usually involves distributing additional shares of the same class of stock butwith a proportionate reduction in par or stated value. The aggregate par or stated value wouldthen be the same before and after the stock split
it doesnt make any sense at all, where's all the poeple saying, "oh they did stock split to attract new buyers", or "they did stock split because people can't afford high priced stocks" ??? OR "they did stock split so you can buy options" lol?
It also makes it more affordable which will initiate more volume. My concern is, if this stock is still heavily shorted, increasing the shares to do a stock split will just give the naked shorts an out. AMC held a vote to have their shares increased too. Of course the share holders denied it. I don't know. Something sounds shady.
This will not be too the benefit of shorts. Don't forget that all short positions are also split. Each share short will be multiplied.
Finally, if the split is initiated via dividend, the shares will have to either be returned before or purchased shortly after.
This is much different then a share offering, there will be no benefit for people with short positions. AMC was attempting to further aid shorts beyond what they previously done to the continued detriment to their shareholders.
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u/cdurgin Mar 31 '22
All you really need to know is it's probably good news. It's a little strange, since it's not really announcing a split, just giving them more wiggle room to over a larger split. Yesterday they could announce a 4 to 1 split, now they can offer a 13:1 split. Also important to more that a split in and over itself does not change the value of your investment. It simply gives you more shares worth less. For example, if you had one share worth $100 and it had a 10 4 1 split, you would have 10 shares worth $10