Stockholders should be marking the 2nd down on their calendars. That's the date on which the video-game retail company will host its Annual Stockholder Meeting, which will include several key company decisions.
Figure 1: The Annual Stockholders' Meeting at GameStop has been scheduled. Is There a Second Rally in the Future?
(Read more from Wall Street Memes: )
Preview of Stockholders at 2021's Annual Meeting
The first quarterly stockholder meeting of GME took place on June 9th, the same day as the company reported its first earnings results from Q1 in 2021.
Stockholders were required to: (1) choose six directors to serve on the company's board until the next meeting, (2) vote with respect to the compensation of the appointed directors, (3) approve the audit committee of the independent registered company, and (4) transact other activities as proposed by shareholders.
At the time, the greatest meeting presentations included the appointment of a new CEO, Matt Furlong, and a new CEO, Mike Recupero. Both were influenced by Amazon's top shareholder, Ryan Cohen. Cohen would then be chairman of the GameStop board shortly after that annual meeting.
Furlong initially stated that the CEO role would come without glamor and that performance compensation would come primarily from stock awards. The previous CEO, George Sherman, had taken on a much more "traditional" CEO role that included numerous benefits (private jets, etc.) and substantial cash-based compensation.
Voting to Take Place On Stock Split And An Incentive Plan
attendees at this year's annual meeting will vote on GME's proposal for a stock split. GameStop has recently announced its intention to offer a stock split via a dividend (current owners of GME shares would be awarded a "dividend" of additional shares rather than cash).
The exact split rate to be debated has not been confirmed. GameStop said that the intention behind the split is to increase the liquidity of GameStop shares. This is a positive development for retail investors (who hold the majority of GameStop's float) and for GameStop itself, since the company may future seek for cash injections via equity issuance.
Another important vote will be on the GameStop 2022 Incentive Plan, which aims to replace the current 2019 Incentive Plan. According to the company's proxy report, the new plan aims to simplify equity issue compensations.
If the plan is approved, 8,000,000 shares of common stock will be available for issuance. According to GameStop, the program must be approved in order to continue to attract, retain, and motivate the company's high-quality management team.
The board of directors, including Mr. Cohen, has strongly urged stockholders to vote to approve the new strategy.
A Short-Term Catalyst In Search
Is an upcoming split a motivator for GME? In theory, a stock split does not add any value to a company. Today, most brokerages offer the sale of fractional shares, which makes splittings appear irrelevant to a certain extent.
The key ingredient in this split is in the options market. Each standard call or put contract leverages 100 shares of an underlying asset, and the value of 100 shares of GME is currently $14,000. GME's high underlying share price, coupled with its sky-high volatility, makes GME options extremely expensive. A 3-to-1 ratio split, however, would make GME options considerably cheaper.
Stock splits have an advantage on shareholder sentiment, which in turn can spark rapid rallies, according to experts. Companies such as Alphabet, Amazon, Tesla, Nvidia, and Apple offer many notable and recent examples.
The board of directors of GameStop is implying that it is making a very wise move here owing to concerns over the Incentive Plan. Nevertheless, if the stock split is approved, it should mitigate some of the dilution fears associated with the plan.
It's also important to note that GameStop's stock climbed more than 100% in the month leading up to its 2021 annual shareholder event. It's certainly possible that the 2022 annual meeting again acts as a "scheduled catalyst." Retail GME investors, therefore, should be on the lookout for sharp changes in the month leading up to this year's June 2nd meeting.
(Disclaimers: this is not investment advice. The author may be long one or more stocks mentioned in this report. Aside from that, the article may contain affiliate links. These partnerships do not influence editorial content. Thanks for your support of Wall Street Memes