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I'm trying to understand the short-squeeze situation happening with GameStop. From what I understand, the basic idea is that as people continue buying up the available stocks, the short sellers are less and less able to buy them back and will continue to bleed money as the demand for (and therefore price of) those stocks climbs ever higher.

Why can't GameStop just split their stocks? It seems to me like the whole squeeze would disappear overnight-- the stock price would drop dramatically and it would increase the available supply. I can understand why they as a company might want their stock price to keep ballooning; but if a short seller is facing $8 billion in losses, they could offer GameStop a massive bribe investment in exchange for a stock split and still come out ahead.

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    splits change nothing. it's exactly like, if you have a $20 bill and you change it for four fives. there is absolutely no difference at all. – Fattie Feb 1 at 15:26
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    Also, stop splits are not something you "just" do - there is paperwork involved and there is a procedure to follow. WHich takes TIME. This is not a "hit the emergency brake" - it is a "start it and in a couple of weeks it splits" operation. Even IF a split would do anything (which it does not for an overshort situation) it just would take too long. – TomTom Feb 1 at 15:31
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    Not that a stock split makes any sense here but lower price stocks are more volatile than higher priced stocks. Splitting could make the situation worse. – Bob Baerker Feb 1 at 16:32
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    Besides the fact that a stock split doesn't change anything, there is also the question why GameStop would get involved in this story at all, because the whole thing isn't a problem for them. – Philipp Feb 1 at 17:08
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    @blankip Stock markets in different countries have different ideas about what a "nice range" for a share price is. For example stocks in big companies on the UK market have share prices much lower than comparable companies on US markets. The only difference between a company with 1m shares priced $1000 each (typical USA) and 100m shares priced $10 each (typical UK) is that a small US investor might own 2 shares while a similar small UK investor might own 200. – alephzero Feb 2 at 1:25
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The split wouldn't change a thing.

All the contracts, options, and the like would be adjusted to account for the stock split. Whenever a stock splits the total value of the company remains the same.

If somebody borrowed 100 shares before all this activity started, and the stock split in half today; then they would be required to pay back 200 of the new shares. Each share would be half the price, but the number of $'s wouldn't change.

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A stock split does not change the value of the long or the short positions in a stock.

If I own 100 shares of company XYZ that is currently trading at $50 (worth $5k) and it splits two for one, I then own 200 shares worth $25 and it is still worth $5k. All that happens is that the float doubles and share price halves.

So if there are 70 million GameStop shares short at $300 then after a 2:1 split, there are 140 million shares short at $150. The dollar amount of shorted stock does not change nor does it remedy the GameStop situation.

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You're asking the wrong question. The right question is, does Gamestop want to end the short squeeze.

If Gamestop wanted to stop the short squeeze, they could do so simply by issuing more shares. That's the one lever they have on this.

However, they don't want to, for two reasons.

First: this gets them in the news, and raises their (originally, very low) stock price, which makes them look good. It also theoretically could allow them to do a stock issue, not to break the squeeze, but to raise capital. All of this is largely a good thing for Gamestop.

Second: Gamestop is a company, and as a company it consists of the people who own Gamestop stock. The people executing the short squeeze clearly do not want to break it! It's unclear what percentage of Gamestop is actually owned by the retail investors, I doubt they own a majority or anything like that, but they may well hold a majority of the shares held by people interested in the matter. (Institutions like the big pension funds, the ETFs, etc., who may well own a majority of the actual stock, don't really care - they're undoubtedly happy to own a now-appreciated-in-value stock, but they'll most likely just keep holding because it doesn't really matter in the long run. And the major C-suite players and other major long-term stockholders undoubtedly are profiting nicely off of this, and again don't really mind the squeeze happening.)

The only people who want the squeeze to stop are the people who do not own GME, because they're short in it, and thus don't get a say!

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  • As a point of reference for the future, it is interesting to note that GME did indeed issue stock at current [arguably inflated] prices: shacknews.com/article/124044/… . I never would have believed that the price rise would have lasted long enough for an issuance to occur, but they managed to do it, completely paying off their debt with the proceeds. – Grade 'Eh' Bacon Apr 27 at 13:30
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Someone holding a short is betting that your company will fail, and tries to benefit. A short squeeze hurts the people who are betting against the future of your company. Most companies would do gladly anything to hurt shorts. There is no way GameStop would do anything to reduce the trouble of these shorts.

Imagine I bet £1,000 that you lose your job next week, another £1,000 that you lose your home, and another £1,000 that your spouse will file for divorce. Would you do anything to help me? Absolutely no.

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The other answers are right. Splitting has no effect on company value... but it kind of does.

And the short-squeeze situation you are talking about would probably get WORSE if they did a split - it would be funny if it happened.

Stocks are generally split because the company wants to make it more affordable to buy a share of its stock. Imagine if you had PEPSI with just 40 stocks available and its worth was 40 Billion... Each stock is worth 1 billion. (I know I am being extreme)

Well this limits the number of people that can buy PEPSI because not everyone has an extra billion.

Even if a stock is trading at $1500 USD this would limit people in buying it. There are services that allow you to buy % of shares but these come with fees and the buying and selling are not done EXACTLY when you want.

So basically in this case if they split the stock, they might increase the amount of people that could buy this by a few %. Not a tremendous amount of people percentage-wise but when you take a small percent and multiply by millions then multiply by the demand... this would be at the very best a push for the those trying to short it and most likely would get more people in on the "screw-the-man" scheme.

It is very likely that Gamestop is trying to split their stock. I would for sure. But this requires filing paperwork with the exchange and the exchange OKing it. Note that most exchanges are stooges for Big Bank. Big Bank pays their bills. I doubt amidst all of this (NYSE knowing Big Bank is pissed at the price fixing) that double down on pissing them off is not what they want. NYSE would probably counter a split request with a statement saying - "if Gamestop trades above $150 for the next 60 days there will be a split"... that's how these things are handled IRL.

Stock splits have two basic effects on market:

  1. Stock will go up way higher than market average when announced.
  2. Stock will go up way higher than market average when implemented.

-funny the price fixing insults as Big Banks use direct exchange feeds and algorithmic software to price fix to their advantage daily.

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    It is not likely at all that Gamestop is trying to split their stock. Once this frenzy is over and GME goes back to single digits, a split would result in an even lower share price, which could potentially result in the stock failing to meet minimum price requirements to be listed on the exchange. – 7529 Feb 2 at 0:08
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    @blankip So you think "Gamestop will never get near $1". Really???? The 52-week low is $2.57. And they were probably overvalued even at that price. – alephzero Feb 2 at 1:31
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    For sure gamestop would split right now if they thought NYSE would let them. This would give them marginal benefit when they have actual work they could be doing to actually materially benefit the business. For sure is anything but sure. – mjwills Feb 2 at 8:41
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    A lot of this is opinion, not fact. If every split guaranteed an increase in marker price, companies would split left and right all the time. – Polygnome Feb 2 at 11:43
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    @blankip If there is so much historical data, I'm sure it will be easy for you to reference that data in your answer. Otherwise, its unsubstantiated guesswork. And yes, if you say "If X, then Y", you imply that this is always the case. – Polygnome Feb 2 at 19:20

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