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GameStop Stock: Ryan Cohen's Clever Plan To Limit Shareholder Dilution

Ryan Cohen might have found the way to align the needs of GameStop's management team and its shareholders.

GameStop  (GME) -  recently announced that its Annual Shareholder Meeting will take place on June 2. On this occasion, shareholders will vote on important items proposed by the company's board.

Chairman Ryan Cohen has the challenge of aligning the wishes of the company's management with those of the company's super-loyal shareholders. Here's what may happen.

Figure 1: GameStop Stock: Ryan Cohen's Clever Plan To Limit Shareholder Dilution

Figure 1: GameStop Stock: Ryan Cohen's Clever Plan To Limit Shareholder Dilution

(Read more from Wall Street Memes: 3 Reasons To Buy GameStop Stock)

The Incentive Plan Vote

On April 8, GameStop announced its plan to split its stock. According to the company, the goal of the split is to increase its stock's liquidity and thus make GameStop shares more accessible to retail investors.

The stock-split idea is part of the company's larger 2022 Incentive Plan. According to the company's , the plan intends to “support future compensatory equity issuances.” According to GameStop, it is crucial that the plan be approved in order to continue to attract, retain, and motivate the company's high-quality management team.

last year that it would issue equity from time to time in a strategic manner. But how can it do this in a way that GameStop's loyal shareholders won't interpret as FUD (fear, uncertainty, and doubt)?

That's where GameStop's brilliant idea of holding a vote on the stock split comes in.

Although the company says its main reason for holding the split is to increase GameStop's liquidity, the truth is, the split will add zero value to the company's fundamentals.

of a correlation between stock splits and short-term bullish movements. Recent examples Alphabet, Amazon, Tesla, Nvidia, and Apple all benefited from short-term rallies in their share prices. GameStop would most likely see the same thing happen.

The Bottom Line

Because GameStop is a highly volatile stock, positive news tends to have a big impact on its share price. And a stock split can undoubtedly be interpreted as a positive catalyst for GameStop's stock.

Ryan Cohen, who understands GameStop's shareholders like few others, may have found the perfect way to align the company's management desires (its Incentive Plan) with GameStop shareholders' desires (the stock split).

Twitter Speaks

What is the next catalyst for GameStop shares to skyrocket in the short term?

(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)