GameStop (GME) – Get GameStop Corporation Report stock remains super popular among retail investors on social media. Looking for new opportunities to beat short-sellers and take GameStop shares to the moon, investors are eagerly awaiting two short-term events.
Let’s take a deeper look into those two possible catalyzing events.
(Read more from Wall Street Memes: Should Investors Give Up On Cathie Wood’s ARK Innovation ETF?)
1. A Stock Split
GameStop management’s proposal for a stock split in a dividend format was approved during the annual shareholder meeting hosted on June 2.
There’s an interesting detail in GameStop’s stock-split proposal: The stock-split option in the form of dividend shares consists of a slightly different mechanism than a normal split. Each GameStop shareholder will receive one more share as a dividend. So in addition to the stock split, shareholders will also receive an extra dividend share.
Although the split has already been approved, GameStop’s management has yet to reveal its final decisions about the stock split. The split ratio and the effects of the split on the share price of the company have not yet been disclosed by the company.
According to GameStop’s board, the next step is to bureaucratically proceed with the charter amendment to include the increase in authorized shares. Shortly after approval and depending on market conditions, the board will determine a split ratio and when would be the best time to execute it.
Stock splits historically have had a psychological factor that triggers short-term rallies, although they don’t add any fundamental value to the stock.
At the end of the day, share prices are determined by supply and demand. It is because of overwhelming demand that GameStop traded higher in 2021. Why couldn’t it happen again this year?
The most recent example occurred with Amazon (AMZN), which began trading on a 20-for-1 split-adjusted basis on June 6. Amazon shares jumped nearly 20% in the weeks before the split. However, after the split, shares fell sharply in line with broad market bearishness momentum.
2. GameStop NFT Marketplace
The other big event awaited by GME investors is the launch of the GameStop NFT marketplace. Expected in July, the company will partner with Immutable X for the entire backend service. The platform promises to deliver an intuitive marketplace where users will be able to trade in-game assets via blockchain tokens on the Ethereum platform.
In late May, GameStop announced a wallet where users can safely store, send, and use Ethereum, NFTs, and other tokens.
Even though crypto and NFT values are down and under strong market skepticism, it is important to note that the NFT marketplace is still in its early days. According to Immutable X, the potential of the NFT market is still huge, having rapidly grown from $100 million in marketplace volume in 2020 to about $23 billion in 2021.
Today, more than 80% of the market is dominated by OpenSea, which is not yet publicly traded. Coinbase (COIN) – Get Coinbase Global Inc Report and eBay (EBAY) – Get eBay Inc. Report are also expected to be among the major players in this market.
Supporters believe the GameStop NFT Marketplace initiative could be an important step toward the modernization of the company’s business beyond brick-and-mortar stores.
While the company’s management has not revealed its other strategies for future growth, the NFT marketplace may be the first major initiative by GameStop management to revolutionize the company’s business in the Ryan Cohen era.
The Meme Power Push
GameStop stock today is highly sensitive to the sentiment of its shareholders, and many traders see the volatility of the stock as an interesting target for short-term trades. GameStop is still the top ticker of discussion on social media, which shows that the popularity among individual investors is still very high.
The beta of GameStop’s one-year period is 1.75, indicating that the stock is highly correlated with market trends, unlike last year, when it traded with a negative beta.
GameStop shares continue to be heavily short-sold. About 23% of its float is currently being shorted. Such high numbers put the stock in a short-squeeze alert, especially when buyer volume suddenly rises due to specific catalysts.
Today, it is believed that a large portion of GameStop’s float is owned by retail investors. The extreme volatility correlated to broad market trends put catalysts like a stock split in the form of a dividend and the announcement of the NFT marketplace as strong stock movers.
(Disclaimers: this is not investment advice. The author may be long one or more stocks mentioned in this report. Also, the article may contain affiliate links. These partnerships do not influence editorial content. Thanks for supporting Wall Street Memes)