Thread by @dlauer

Ok - I've found there's confusion everywhere (in the industry and online) about how all of this will work. The problem is that it's a unique combination of a dividend and a split, and it actually has the characteristics of both.

https://twitter.com/dlauer/status/1544836580795375619

Part of the confusion is that there are standard dividend dates as part of the corporate action and announcement (record date, pay date, ex date) similar to a dividend. However, most of that doesn't make sense in the context of a split.

From a trading perspective this will look just like a split. If you own 100 shares of GME at the end of the day on July 21, you will own 400 shares when you wake up on July 22 (assuming your broker correctly processes this action as a split). The price will drop accordingly.

As the press release explains, GME will trade on a split-adjusted basis on July 22 (the ex-dividend date in the corporate action). If it's trading at $200 on July 21, it will trade at $50 on July 22. The value of your position will not change, despite receiving more shares.

As far as short sellers are concerned, the borrower of the shares is responsible for paying dividends to lenders - the borrower will receive the share dividend, and be obligated to return the new share amount. Note that the dollar value of what they are borrowing doesn't change.

I will continue to look into what might happen given the high level of short interest - it's certainly a unique situation, which is why a lot of folks are confused. I'll add on to this thread as I learn more.

Adding further explanation on how this works for short sellers, as per the MSLA that is used as boilerplate for most brokers. The borrower's obligation changes in terms of shares, but not in terms of value.

h/t to @goldielips1 who's been all over this over on Superstonk.