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The original was posted on /r/gmecanada by /u/CriticalMushroom8812 on 2024-04-04 17:34:29.
TADR: GameStop’s DRS count is being suppressed by the DTCC holding directly registered shares (specifically, DSPP shares) for the benefit of ComputerShare for the benefit of DSPP plan participants. There were approximately 78.8 million shares of GameStop Class A Common Stock held by registered shareholders (counting “pure” DRS plus DSPP) on March 20, 2024.
By now you’ve almost certainly seen GameStop’s latest earnings report and 10-K filing reporting a nearly unchanged 75.3M DRS’d shares. Here’s a table of the share history as reported by GameStop SEC filings:
The total outstanding shares went up slightly (~359k), probably due to internal compensation (e.g., shares given to employees by the Company). These are shares newly entering circulation; which normally means to a broker who would have their shares held by the DTCC. These ~359k shares newly issued by GameStop to their employees thus accounts for part of the ~500k new shares (~72%) now held by the DTCC leaving ~141k shares unaccounted for yet.
DRS IS THE WAY
The DRS’d share count dropped by 0.1M (~100k). As the SEC is presumably now watching the share count closely, we can probably assume that the remaining ~141k shares now at the DTCC are from the DRS count (141k rounds down to 0.1M). Why did shares leave DRS? Well, there are a few options:
- Apes sold/moved shares out of DRS (unlikely, but not impossible as times are tough).
- DTCC found more ways to Rug Pull shares out of DRS a la the MainStar DRS Rug Pull [DD]. Based on prior estimates, the Mainstar retirement account shares would’ve run out by around Dec/Jan 2024 and it’s almost certain that the DTCC found more shares elsewhere to rug pull back as Mainstar wasn’t the only custodian.
- The DRS reporting counted direct registered shares differently.
I believe #2 and/or #3 are much more likely as various efforts have emerged attempting to *un-*DRS shares and remove options for direct ownership, e.g., in the UK as highlighted by kibblepigeon and others. These efforts against DRS strongly suggests DRS is the right way forward.
What Happened When The Count Happened?
Very interestingly, GameStop did their share count on March 20, 2024 [EDGAR]
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
This share count day is very special because it counts directly registered shares (DRS) on the books of ComputerShare and the shares held by the DTCC. On this day, the sum of those shares held by ComputerShare and the DTCC must add up to the total outstanding shares.
On this March 20, 2024 share count day, 3.6M shares suddenly popped up available to borrow at 9:30am.
Gone by around noon that same day; presumably borrowed.
Shorts needed 3.5M+ shares. Someone knew that and found 3.5M+ shares for them to borrow.
These 3.5M+ borrowed GME shares won’t settle until T+2Bd or reach Close Out until T+35Cd; conveniently well after GameStop’s reported share count allowing these extra liquidity shares to potentially be counted as “held” by anyone who needed to share liquidity through borrowing (*cough* shorts *cough*). The main catch with this approach for the day that GameStop counts shares is that it would inflate DTCC’s count of shares as both the borrower and lender claim ownership of the same shares. Double counting these shares at the DTCC plus the shares at ComputerShare would bork the total to more than the Total Outstanding; which is a problem the SEC 🙈 doesn’t want to see. If these shares can’t be double counted, where are these shares borrowed from?
Share Counting Day Is A Special Day
You may recall from last year a Trust Me Bro (March 22, 2023) alleging the SEC prevented GameStop from reporting some “discrepancies” with the number of direct registered shares. Right after this Trust Me Bro, GameStop started reporting numbers for Cede & Co (DTCC) alongside Record / Registered DRS Holders. Then from March 2023 to June 2023 we could see Apes DRS-ing shares took shares away from the DTCC [DD].
I think these share counting days are special because the shares are counted are on the record books of ComputerShare plus the shares held by the DTCC – there’s only two places to look. Borrowing internally within the DTCC doesn’t help on this day (as explained above). If Broker A borrows shares from Broker B, Broker A gets to count their shares but Broker B can’t. Similarly, consider what happens if a SHF needs GME shares. On this particular share counting day, if the SHF borrows from someone (e.g., Fidelity), Fidelity can’t count those shares along with the SHF counting those shares. Also, GameStop is counting shares at the DTC/DTCC/Cede & Co level, not shares at brokers or entities like Fidelity or the SHF. In order to borrow shares on this day for the share count, the DTCC must borrow from the only place possible, which is where shares have been moving to: DRS shares at ComputerShare. Thus, the discrepancy shows up when GameStop does the share count for their SEC filing and is why GameStop has been reporting the shares held by registered holders at ComputerShare and held by the DTCC. (Due to the MainStar rug pull, we don’t necessarily or clearly see the same discrepancy again until those rug pulled shares run out around Jan 2024 [DD]. Hello March 20, 2024.)
If we go back to ChartExchange’s historical Borrow data, we see a spike in shares available to borrow between March 21 (the day before GameStop counted shares for the SEC filing) and March 22 (the day GameStop counted shares for the SEC filing). From a low of 70k mid-day on March 21, to a peak of 500k available to borrow by the end of the day on March 22. If we tally up each of the drops in availability (assuming they are borrows), we can estimate 750k shares were borrowed on that day.
I posit that GameStop originally intended to report a 750k share count “discrepancy”, but the SEC said no; which resulted in the March 22, 2023 Trust Me Bro post. (FWIW, it makes sense the SEC immediately shot down reporting a 750k share discrepancy as it would’ve kicked off a shitstorm of questions about a SEC filing counting 750k more shares than there are outstanding thereby kickstarting MOASS.) If correct, then share borrowing from ComputerShare appears to have been used last March to “fix the 750k share discrepancy” for the SEC report; and share borrowing from ComputerShare appears to be used again this March 2024 borrowing 3.5M+ shares to fix a 3.5M+ share discrepancy.
Also, between March 22, 2023 and March 20, 2024 is roughly 1 year and there are about 252 trading days in a year. This “share discrepancy” visible from share borrowing increased by approximately 2.75M (=3.5M - 750k) over the past year. 2.75M shares over 252 trading days works out to just shy of 11k shares per day increase in the “share discrepancy” which is surprisingly close to the previous number of shares directly registered per trading day: 12k [DD]. Not only is the visible ~11k/trading day share discrepancy within 10% of the historical 12k shares directly registered per trading day, but if you consider that the economy and inflation has been sucking away buying power for shares, a slight reduction in the number of shares directly registered per trading day *mak…
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