[heybrendan]

Quite interesting indeed. From Gamestop's recent Form 10-K (Q4 2023) SEC filing:

> "As of March 20, 2024 [...] approximately 75.3 million shares of our Class A common stock were held by registered holders with our transfer agent (or approximately 25% of our outstanding shares)."

I've never seen anything like this. It seems absolutely unprecedented.

Recently Ian Carroll posted an overview [2] on X where he attempts to untangle the mess of the chaos surrounding Gamestop and its stock. I'm not going to pretend to understand the (dys?)function of our financial markets or everything that he shared, but my eyes are peeled.

[1] https://news.gamestop.com/node/20376/html

[2] https://x.com/Cancelcloco/status/1790524969623175629

[jcranmer]

> Recently Ian Carroll posted an overview [2] on X where he attempts to untangle the mess of the chaos surrounding Gamestop and its stock. I'm not going to pretend to understand the (dys?)function of our financial markets or everything that he shared, but my eyes are peeled.

So just so you're aware... this is not a good source for financial understanding. This is the financial equivalent of someone who struggled with high school physics going to the Wikipedia article on quantum chromodynamics to then turn around and explain it to you.

Like, the explanation of derivatives is wrong. Leverage has nothing to do with derivatives; derivatives are essentially trades that are trading on the value of another asset rather than the asset itself.

The short answer as to what has happened is GameStop is a video game retailer that hasn't been managing the trend to digital distribution. For $REASONS, the stock experienced a massive bump in 2021. The rapid inflation caused Robinhood (among a few other apps, but mostly Robinhood) to suspend the ability to buy shares, for reasons beyond proponents' ken [1]... which caused it to be interpreted as some financial conspiracy to keep the hedge funds alive at the expense of regular people. When the resulting short squeeze proved less calamitous than expected [2], the people who bought high have turned to increasing amounts of copium to motivate why the short squeeze hasn't happened yet, and turned to anything they can find that might enable them to trigger the "real" short squeeze (which at this point is no longer a mere short squeeze but a total financial apocalypse).

[1] The simplest explanation (though not entirely accurate, it is sufficient to get the reasons why across) is that Robinhood was borrowing money to buy the stocks on users' behalf, and the counterparties effectively did a margin call on Robinhood.

[2] One hedge fund failed.

[lfmunoz4]

held by registered holders with our transfer agent

what does this mean? what is the significance?

[jcranmer]

Short answer: the people doing this think it's going to fuck short sellers over.

The longer answer involves trying to make a coherent story by people who are financially illiterate trying to read moderately advanced modern finance textbooks to explain why they were unsuccessful in fleecing Big Bad Finance™ by somehow finding a way to trigger financial apocalypse. The more you try to understand it, the less sense it is going to make.

[deified]

I'd rather say they are trying to prove some things to the general public.

People new to the stock market assume that when they buy shares through their broker, they own the share. They also often buy shares in hopes that the stock price will go up.

However, more often than not, a broker will hand out an IOU when you "buy" a share, and then proceed to rent out the share to short sellers. You buy a share in hopes that the price will go up, but that share is then used for the opposite.

Buying a share through the company's registered custodian prevents this.

They also want to show the general public that even when 100% of a company's shares are bought, owned and locked down - short sellers are still able to generate phantom shares to move the stock price down.

[akerl_]

> However, more often than not, a broker will hand out an IOU when you "buy" a share, and then proceed to rent out the share to short sellers

There are specific stock lending programs, but can you back up the claim that brokers are silently lending shares from the portfolio of people who did not opt in to such a program?

[tptacek]

The actual purpose of DRS shares is to make it psychologically more difficult for low-information retail traders to sell shares.

[heybrendan]

Good question. What that quote from the recent filing is describing is the result of investors using the "Direct Registration System" (DRS), which is a system for book-entry ownership [1][2].

Given the example of risk HN user /deified/ shared regarding suspicions of brokers clandestinely distributing IOUs without investor knowledge where they should, in fact, be purchasing real shares, DRS offers the ability to move shares from one's broker to the company's transfer agent.

In effect, what DRS seemingly provides is a far more robust chain of trust and custody, as well as a more concrete level of assurance that shares in one's account are, in fact, real (and not IOUs).

In this case, the 10-K filing provides direct evidence that investors are consistently moving their Gamestop shares out of their respective brokers, to Gamestop's transfer agent, a company called Computershare (or purchasing shares directly via Computershare).

A conclusion one could possibly draw from this is that hundreds of thousands of Gamestop investors have collectively agreed that they can no longer trust their brokers, they are fed up with the true reality [and limitations] of "beneficial ownership", and are instead registering their Gamestop shares with the transfer agent (Computershare). All to the tune now of 25% of the total outstanding shares. As far as I'm aware, behavior of this magnitude has never before occurred.

Should that percentage continue to climb, it will be interesting to see what effect (if any) it will have on Gamestop's share price, assuming true supply and demand and real price discovery is still a fundamental part of how our markets function.

Ian released a video [3] this past December 2023, related to this topic.

[1] https://www.computershare.com/ca/en/insync/summer-2016/about...

[2] https://content-assets.computershare.com/eh96rkuu9740/630fe9...

[3] https://x.com/Cancelcloco/status/1740515711775346762