Moron does bare minimum to explain why it was a split and not a dividend via /r/wallstreetbets #stocks #wallstreetbets #investing


Moron does bare minimum to explain why it was a split and not a dividend

This moron does the bare minimum amount of research to try and explain there is nothing special about a stock split wether it’s via dividend or not. I will basically copy paste one of my other comments on another sub to try and help you ding dongs understand. Since we’re not in such a bad echo chamber here, other users can input any corrections or highlight where I’m an idiot and completely wrong,

Staring here:

All joking aside, I’ve tried to explain and will try again. I think a lot of the confusion is coming from using words like “dispersed”, “received”, “sent” and just an over all misunderstanding of how stock splits work.

This is probably caused by some moron who wrote some DD a while ago doing a shitty job of explaining how stock splits work and instead of verifying anything for themselves apes just go “omg this sounds so smart, must be god tier DD”.

The main thing fucking them up is the fact that it’s called a stock split “via dividend”

Definition for dividend:

What Is a Dividend? A dividend is the distribution of a company's earnings to its shareholders and is determined by the company's board of directors. Dividends are often distributed quarterly and may be paid out as cash or in the form of reinvestment in additional stock.

Definition for stock split:

What Is a Stock Split? A stock split happens when a company increases the number of its shares to boost the stock's liquidity. Although the number of shares outstanding increases by a specific multiple, the total dollar value of all shares outstanding remains the same because a split does not fundamentally change the company's value.

So in laymen terms, a stock dividend is when the company shares its profits with investors either through a cash dividend or gives then increased equity with a stock dividend. DO NOT confuse this with a “stock split via dividend”. A stock split is simply when a company decided to split the amount of shares in a company without changing the overall value or market cap of the company.

You know gme had a stock split for several reasons. One, they did not share any profits with share holders. They have 0 profits to share to begin with. Two, they did not give anyone increased equity in the company through this dividend. Three, every share holder owns the exact same percentage of the company they did before the split. Just distributed over more shares.

So why is it called a “stock split via dividend” then?

§ 173. Declaration and payment of dividends. No corporation shall pay dividends except in accordance with this chapter. Dividends may be paid in cash, in property, or in shares of the corporation’s capital stock. If the dividend is to be paid in shares of the corporation’s theretofore unissued capital stock the board of directors shall, by resolution, direct that there be designated as capital in respect of such shares an amount which is not less than the aggregate par value of par value shares being declared as a dividend and, in the case of shares without par value being declared as a dividend, such amount as shall be determined by the board of directors. No such designation as capital shall be necessary if shares are being distributed by a corporation pursuant to a split-up or division of its stock rather than as payment of a dividend declared payable in stock of the corporation.

8 Del. C. 1953, §  173; 56 Del. Laws, c. 50; 59 Del. Laws, c. 437, §  10; 65 Del. Laws, c. 127, §  5;

GameStop is based in Delaware. Delaware, like any other state, has specific laws governing how dividends work. What this is basically saying is you can have a cash dividend, a property dividend, or shares in the company. If you’re going to pay a share dividend, then no shares should have a value less than the par value of the other shares of that class. If they are going to be less then that would be decided by the board and they might be a different class of shares. In either case, capital has to be designated for doing so, ie, using company profits.

OR there is no need to designate ANY capital IF you just split the shares. Ergo, a stock split. That is the part I highlighted in bold.

It’s the exact same thing as a forward split. I’m not sure Delaware law allows you to call it a forward split but it works exactly like a forward split.

The most common type of stock split is a forward split, which means a company increases its share count by issuing new shares to existing investors. For example, a 3-for-1 forward split means that if you owned 10 shares of company XYZ before it split, you'd own 30 shares after the split took effect. However, the overall value of your investment wouldn't change (at least in theory). So a forward split results in more outstanding shares but a lower price for each share, with no net gain or loss in the company's overall market value.

Doesn’t that sound exactly like GameStop’s “split via dividend”? That’s because it is.

So the gme filing said shares will be distributed from GameStop to shareholders. Distributed in this context just means they voted to 4x shares and every share holder will get 4x shares they currently hold. It doesn’t mean that Ryan Cohen or Matt furlong will personally go around to each of your brokers and hand out a limited quantity of shares for each registered share holder. It doesn’t mean they are “distributing” stock certificates to each holder. It means the distribution of company wealth or market cap changes from 78m shares to ~250m shares. The same way that you can distribute $10 over 40 quarters or 100 dimes. It’s the same amount of money with a different distribution. The board and share holders voted on that, but they’re not physically distributing shares. Each individual share doesn’t have a stock certificate. Stock certificates haven’t been used for over 20 years.

So when some brokers say “we’ve received the shares from Dtc” (seems to be the German brokers) either it’s a mistranslation, the service rep doesn’t understand how it works, or they literally just mean “we’ve been given the instructions by the DTC to officially perform the split.” It DOES NOT mean they received a limited basket of shares from the DTC.

Mods please delete or reflair if this post is too regarded for this sub

Submitted August 06, 2022 at 01:37AM by tendieful
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