What happened
Shares of GameStop (GME 6.16%) are running 6% higher Tuesday morning at 11:23 a.m. ET after the video game retailer enacted its 4-for-1 stock split for shareholders as of yesterday's market close.
While the investors will receive three additional shares of stock for every one they own, the shares won't be distributed until after the market closes on July 21 and they won't begin trading until the market opens on Friday, July 22.
Image source: Getty Images.
So what
Investors have been waiting since March for GameStop to split its shares, which the retailer says will be in the form of a dividend. Many meme stock traders believe that boilerplate language will be the catalyst that triggers a massive short squeeze.
Typically when a company pays a dividend, short sellers are required to make that payout to investors who are long. That could be expensive for them, particularly on such heavily shorted stocks like GameStop where 21% of the company's float is sold short.
When it comes to stock dividends, it's more of an accounting issue, one where GameStop essentially determines how much it keeps in its retained earnings account. Short sellers are not going to have to cough up an additional three shares.
Well, yes they will, when it comes time to cover their position, or buy back the shares they borrowed. But just like investors who are long, the price of the stock will be reduced by the split amount, or 4-to-1, so they will not be out any more than they otherwise would have been.
Now what
GameStop launched an NFT wallet in May, launched its NFT marketplace last week, and this week it's splitting its stock. It's a lot of activity for the video game retailer, but none that really relates to its primary video game business, which remains under pressure.
