Popular meme stock of retailer GameStop has seen a renewed rally over the last week and soared during after-hours as the company announces stock dividend.
Video game retailer and consumer electronics store GameStop has seen a bullish streak over the last week of trading, with a major jump in after-hours trading yesterday as the company filed an 8K form with the Securities and Exchange Commission (SEC), requesting shareholder approval for a stock split. Increases of the last week are of a scale only comparable to two other runs since the company was publicly listed in February 2002, with share prices jumping over 160% over the last 10 days.
The filing of a stock split enables the company to seek approval from shareholders to increase the 300,000 existing Class A common stock to one billion shares. Critically, the filing seeks to initiate the split in the form of a dividend, which means that rather than individual shareholders having their holdings be divided further, existing shareholders are issued additional shares.
Retail excitement skyrocketed overnight with investors on popular subreddits such as WallStreetBets and Superstonk enthusiastically discussing the filing, as well as Twitter users celebrating the split.
“… is today THE day” commented one Reddit user 4theLoveOfKnowledge, as many others watched the stock price rise over 16% in after-hours trading since the split was announced.
The split continues the renewed energy around GameStop, with insiders having made major share purchases recently. Chairman of the Board and Chewy founder Ryan Cohen had also filed a recent 13D form to the Securities and Exchange Commission, buying over $10 million worth of shares in the company on 22 March, bringing his total ownership to 11.9%. GameStop Director Larry Cheng also doubled down, purchasing 4,000 additional shares.
“I put my money where my mouth is,” tweeted Cohen after the purchase filing was made public.
The month has seen major moves around one of the most notorious stocks on the market, with GameStop announcing the launch of the beta of their NFT Marketplace earlier in the month, collaborating with blockchain partners Immutable X and Loopring to bring low fees and security to the platform. As of writing, the beta platform allows for the connection of a Layer 2 Ethereum wallet to the marketplace, with an “Almost Here” sign on the homepage.
Central to much of the commitment in continued retail investment in the company is belief in Cohen’s activist investment background, which saw him found and take public online pet food retailer Chewy, and more recently striking a deal with Bed Bath & Beyond allowing Cohen to choose three members of the company’s board in an apparent attempt to turnaround the struggling company, similar to his takeover at GameStop.
Another driving factor of retail investment extant since early last year is the belief that the short squeeze of GameStop stock in January 2021 has not yet been completed, with short sellers having doubled down on their positions and a renewed squeeze imminent. The implications of the stock split and dividend on the short squeeze hypothesis are unclear, but many online investors believe that the dividend could initiate a bullish run, similar to Elon Musk’s Tesla’s split in 2020.
With short interest just shy of 20% according to NYSE data, market indicators from global financial analytics firm Ortex does indicate that another short squeeze is possible, with the firm reporting that short sellers lost yet another $426 million in losses as of last week.
Markets are yet to open and renewed interest and purchasing pressure are likely to have a dramatic impact on the GameStop’s stock volatility when the gates open today.