A few people have raised questions about taxation on the proposed stock dividend. As far as I can see, the stock dividend would not be a taxable event as no cash alternative would be offered.
Effectively, it looks like Gamestop is proposing to do a stock split using stock dividend as the mechanic. That would increase the number of issued shares while the value of the company stays the same. So, where you used to have 1 Gamestop share trading at $190, you’d maybe now have 7 worth $27.14 each. There’s no gain to tax. Any liability for tax would only kick in if you subsequently sell your shares at a profit.
The spilt is handled the same with fractional and whole shares but given that fractional shares go to .0000007 there will be a point to which they round off at.
Freetrade still doesn’t allow us to vote though so all this worry for Dividends may be pointless as there seems to be a lot of shares held in a brokerage that forfeits our right to have a say.
I would say, now more than ever it is vital that shareholders get to have a say in the upcoming meeting in June.
Perhaps all of those worried about how a dividend will be handled should consider what other actions are needed to perhaps not only ensure they get the correct share dividend but also the vote that may secure such a thing.
We also have to consider the transaction cap is STILL in place, I’m only in £40k but still have to liquidate in chunks and pay x2 fees (i wonder if that works out more expensive) if i want to get out.
I shudder to think what would happen if this SP did jump considerably. You would be there all day trying to sell and each transaction would carry individual FX fees and charges.
But in a stock split you end up with more shares so for example if it was 2 for 1 even if you had 0.0000001 shares it wouldn’t matter because you would end up with 0.0000002 shares post split
There is a rounding that takes effect but I can’t remember to which decimal place. I’m sure it was mentioned here a few weeks ago. It’s so tiny that it could be 1p-2p territory.
This would be a standard stock split, I’ve had no experience with the proposed GME split.
Technically, Gamestop isn’t proposing a stock split. They’re proposing a stock dividend. So it’s a dividend issued in the form of stock. Each share would be entitled to receive additional shares at a set multiplier. So if it’s a 7 for 1, you’d be issued with the correct number of shares to take your holding from 1 share to 7 shares.
I’d assume for Freetrade customers, this will be relatively straightforward. Presumably, the US custodian, Drivewealth, will just notify the company of the number of GME shares it holds on behalf of Freetrade customers and then it will be issued with the appropriate stock dividend which will, in turn, be credited to each of the individual beneficial owners.
I am sure that Freetrade will be able to facilitate this type of transaction if it is confirmed by the company following the vote. Incidentally, Tesla are also following this path and Google and Amazon have stock splits in progress so you’d expect that brokers are prepared to manage this type of transaction.
The current agenda is for voting to start in April. The meeting is in June (date TBC).
As for Freetrade facilitating individual voting, while past experience suggests this is unlikely, Gamestop’s preliminary proxy statement suggests that non-votes will be considered as FOR the shares amendment proposal. So, the only thing that would be an issue here, I think, is if Freetrade/Drivewealth actively voted against the proposal (or abstained) on our behalf. In order to do that, they’d have to have had the shares in their possession on the record date (8 April 2022) not on loan.
So, in conclusion, it appears that the stock dividend is most likely to go ahead and it appears that Freetrade is completely capable of managing the process. Exciting times ahead.
Think I’ve had Tesla and maybe one other stock split since being with Freetrade so fingers crossed.
That’s interesting that non votes are classed as FOR, is that normal or something they announced in their most recent filing about the meeting?
Extremely exciting times ey! I believe voting starts 4/20, apt The non-votes clarification was nice to read, should see it over the line easily enough I’d say/hope.
Indeed. They’re keeping everyone guessing as well on this and they don’t even have to win the vote to do a stock dividend as the current 76M or so issued shares can still be increased to 300M within existing permissions.
The non-votes clarification was nice to read, should see it over the line easily enough I’d say/hope.