The American video game retailer, which has become a favorite “meme stock” among retailers, revealed in an SEC filing during After Market Hour on Thursday that it plans to implement a stock split of its Class A shares in the form of a stock dividend.
Gamestop said it plans to increase its number of shares from 300 million to 1 billion, indicating that it will split the 3-to-1 stock, giving existing shareholders two more shares for each share held in the company. The plan is still subject to shareholder approval at the company’s annual meeting.
The company’s stock, which reached its 2022 high of .5 189.59 on March 28, jumped 15% in premarket trading on Friday after the news before the New York Stock Exchange closed 0.8% lower.
Compare with Apples And Amazon, whose share price has hovered around $ 3,000 in recent months, and Tesla’s stock price, which closed above $ 1,000 on Friday, is relatively more affordable for gamestop mom-and-pop investors and those with a new investment trend COVID- 19 became popular during the epidemic.
Stop playing on the moon
GameStop is one of the most popular meme stocks on the Reddit forum, a very popular subreddit Wall StreetBet where users discuss the next stock. Investors stockpiled GameStop’s stock in January 2021, sending 400% skyrocketing shares for the week of January 29, 2021 All the time Maximum 325.
According to estimates by financial analyst firm S3 Partners, this has created a short-term pressure on gamestop stocks in a push for short-sellers that have lost a combined প্রায় 13 billion overall. Market observers have blamed Gamestop’s stock spikes for hedge funds that have made substantial gains from short-term pressure.
Gamestop’s stock fell 49% from that peak on Friday, April 1, as many investors were unable to justify the company’s stock price due to its poor financial condition.
Failed to keep GameStop’s finances
In the most recent fiscal year ending January 29, Gamestop booked a net loss of $ 381 million, 77% more than its $ 215 million loss in 2020. However, revenue increased to $ 6.01 billion from $ 5.09 billion in the previous year. Prior to the brief pressures in January 2021, there were rumors that the gamestop might go out of business as the company announced the closure of the store and invested millions of dollars in debt.
“The greed of short sellers to bankrupt Gamestop – ironically, they’ve probably saved Gamestop forever now,” said Justin Doppirala, founder of Domo Capital, cited by Digital Trends.
With money raised from the securities market, Gamestop could turn its business around. The company recently announced plans to enter the non-fungible token or NFT by the end of the second quarter of FY2022.
Risky bets for short sellers
For short sellers, Gamestop’s planned stock split will force them to buy additional shares before repaying their borrowed shares.
Since the company plans to split its stock by issuing a stock dividend, shareholders who lend their shares to short sellers are still entitled to dividends from Gamestop, while the short seller must repurchase the stock before the pre-dividend date or acquire the short stock. Pay dividends.
