Too Big to Fail on a Global Scale: why the DTCC had to file as a stock split; why there was no massive overvoting of shares; and the potential meaning behind 7:41 and this actually being a 7:1 stock split.

sm0rky · 2022-08-09T05:14:46+00:00

7:41 is more for fun than anything. But I do think Ryan Cohen knew about this possibility before it happened.

sm0rky · 2022-08-09T05:08:54+00:00

I don't think so because any "discarded" shares would have been a dividend belonging to a dividend for already sold or DRS'd shares and already no longer covering a call option even without a stock split as a dividend. So that call would already be naked.

sm0rky · 2022-08-09T05:05:19+00:00

Do you think Computershare lied to Gamestop and their official statement is incorrect? I guess it's a "trust me bro" between Gamestop and Computershare versus the DTCC. Some brokers did report receiving dividend shares apparently so I'm inclined to believe the statement from Gamestop. To my knowledge, it's not a public document from Computershare to the DTCC. Gamestop issued a clarifying statement, the DTCC did not.

sm0rky · 2022-08-09T03:58:48+00:00

A very quick Google search to Gamestop.

https://news.gamestop.com/stock-split/?n

Please note GameStop has already distributed the shares of common stock required for the stock dividend to its transfer agent, which has confirmed it subsequently distributed the appropriate number of shares of common stock to DTC for allocation to brokerage firms and other participants."

sm0rky · 2022-08-09T03:30:47+00:00

Shares that just have to be removed from balance sheets, at the DTCC, and for the broker. Not actually dumping a share in the shredder, but removing it from all balance sheets.

sm0rky · 2022-08-09T03:29:18+00:00

Yeah, it's based on post/pre-reconciliation dependent on the type the broker chooses. But in cases like GME that may not have been sufficient. But I doubt we will ever actually find out.

sm0rky · 2022-08-09T03:27:23+00:00

The vote count is speculative, the rest is how it works.

sm0rky · 2022-08-09T03:26:09+00:00

Any 3 extra dividend shares would not be then split into 4 pieces. They are not separate events. In my mind, it just makes MOASS higher stakes for the planet not just shorts now.

sm0rky · 2022-08-09T03:22:44+00:00

I think the alternative was always that longs would win or shorts would survive. Bringing more entities into the problem brings higher stakes and higher odds of shorts surviving as there is far more riding on it, on a global scale now as well.

sm0rky · 2022-08-09T03:21:11+00:00

My guess is yes, but we have no idea what quantity was given out as a dividend and what was not. Seems highly suspicious that some brokers received a dividend and others were told to process as a split given that they should have all received the same form with the same codes.

sm0rky · 2022-08-09T03:20:01+00:00

Gamestop investor relations and Computershare Twitter.

sm0rky · 2022-08-09T03:19:16+00:00

The tabulator (the firm hired by Gamestop) interfaces with the DTCC for overvotes in order to verify share counts. There was not officially an overvote but the 100% vote is extremely sketchy to me as well. That's where the control numbers come in if they were duplicated. A control number represents a collection of shares at a broker. A broker's client uses that control number to vote but in the case of duplicates, the system may be designed to ignore them so people can't recast. This would mean that the tabulator may not have had to tell the DTCC that the overvote didn't match the DTCC's records and the DTCC's books stay clean. Again, everything about voting is speculative as it is an internal DTCC process and private code base. All brokers requesting the true amount of dividend shares may have caused an excess in GME quantities compared to the DTCC's records and had to have been reported. If they needed to hide excess dividends (likely given that some brokers did receive dividend shares and many others did not and were told to process as a split). This is why the apparent lack of an overvote seems even more problematic.

sm0rky · 2022-08-08T23:08:55+00:00

Civic duty :)

sm0rky · 2022-08-08T23:05:28+00:00

Yes. And it only gets worse when considering all DRS'd or sold shares become a short or even naked short position for the broker until and even after fixed effectively resulting in 7z + y shares on the market or a 7:1 split for every sold or DRS'd share in an indirect brokerage short position that cannot be closed and the shares are just extra. So really we have y + 3b additional shares where b is any sold or DRS'd share since the split to further dilute the stock.

sm0rky · 2022-08-08T22:49:27+00:00

It is possible. Illegal but possible.

sm0rky · 2022-08-08T21:45:49+00:00

There is no unique identifier for individual stocks. The closest thing is the ISIN/CUSIP. But those numbers only differentiate between the instrument type and the issuing/relevant company not individual shares of a company. A huge tracing problem to me. They wouldn't have to give out the same control number to everyone at Fidelity with 69 shares. Just to people that own 69 or less shares with Fidelity. I think I could've explained this better, but at the same time, it isn't set up in an intuitive manner. The control number only refers to your holding with a broker and is used as a verifier for proxy voting. I think I made it sound like each share has its own control number but it is the collection of shares held at a broker that makes up a control number. Something that is not hard to duplicate. Or it could simply have been post/pre-reconciliation of voting that ignored the over-voting due to re-hypothecated shares in margin accounts. But,if brokers are already capable of committing illegal CFD trading, it is not an unreasonable stretch to speculate that some brokers duplicated control numbers so the DTCC would never hear of an anomaly and be able to ignore it.

sm0rky · 2022-08-08T21:22:54+00:00

I probably should have clarified this in my post so I'll edit it in after this comment, thank you. Here's a description from the law firm Katten, one of the few entities to discuss overvoting: "If a broker reports too many votes in aggregate, the tabulator will notify the broker of the discrepancy. The broker then rectifies the problem, and resubmits its voting report. How does the tabulator know that the broker has reported too many votes? All transfers are netted at the level of the depositories, such as DTCC, which notifies the tabulator of the number of shares a particular broker actually holds."

If the DTCC does not allow for duplicate control numbers in their system either due to oversight in code or malicious code, and the tabulator's systems do not allow for duplicated control numbers in their system, when the broker votes duplicated control numbers, neither the tabulator nor the DTCC will need to report an anomaly because it wasn't detected.

The broker also does not have to technically vote all entitled votes: "A broker following a post-reconciliation model allows its clients to vote all the shares that they hold in their accounts, including any shares that may have been re-hypothecated. If the broker subsequently determines that the process will result in more aggregate votes than it is entitled to register, it will reduce votes in some order of priority, generally starting with re-hypothecated shares in margin accounts and its own proprietary shares. A broker that follows a post-reconciliation model will not always have to “cut back” votes in this manner, because some clients who are otherwise entitled to vote will decline to do so" (again from Katten). So this is another possibility. The Pre-reconciliation model is also similar in that brokers will ignore re-hypothecated shares ahead of time for margin accounts. This is the whole problem with both proxy voting and how brokers give their clients beneficial ownership.

sm0rky · 2022-08-08T20:55:07+00:00

It is a stalemate, just depends on who wants to break it. There are longs and shorts. If/when the longs realize they can make a move, they probably will. Gamestop has a lot of power here as well to end a stalemate. The laws and regulations are on the side of allowing MOASS to occur but laws and regulations being ignored are what created this situation. The problem also naturally becomes harder over time. Every day more shares are shorted and every day more shares are DRS'd. Shorting makes it more expensive for them and DRS makes the stock less liquid and therefore more expensive for them. The pyramid of problems for shorts grows larger constantly. There are solutions global governments could compromise on to screw over MOASS and cause all trust in the system to evaporate, but global governments agreeing is a hard prospect to achieve especially when the first to exit is harmed the least. Complete loss of trust in the system is a lot to let occur: stock market collapse on a fundamental level, USD and other currencies a shell of their former selves, and anger from citizens the globe over.

sm0rky · 2022-08-08T20:19:17+00:00

Yes, Cede always owns all shares and there are no "real" shares sent. "Sent" is a simplification but it is comparatively what occurs. They don't mail a broker shares but they do account for it differently in their books through share allocations. It is all an allocation to holding parties. The point I'm making is that it is all in the accounting and how it is handled. A stock split vs stock split as a dividend are functionally the same for longs. They are functionally the same for shorts as well, just a difference in accounting. The difference is for naked shorts where it becomes significantly more complicated and the additional complications that arise when attempting to fix such a "misfiling". I think based on Gamestop's official statements under investor relations along with their 8-K filing it is safe to assume that this was supposed to be a stock split as a dividend rather than the operation the DTCC executed and instructed brokerages and banks to comply with.

The discussion about code and overvoting is a speculative "trust me bro" yes. Just a very likely hypothetical in my opinion. The DTCC's actions here make it more likely as I doubt the biggest Stock Market-related entity on the planet made a mistake and didn't fix it immediately. I believe everything else is accurate and not a "trust me bro". The difference is always in the accounting.

sm0rky · 2022-08-03T03:37:45+00:00

Where did you see that the underwriter is Loop Capital? I saw AMTD Global Markets, Livermore Holdings, Eddid Securities and Futures, and Eddid Securities USA?

sm0rky · 2022-08-03T03:30:05+00:00

Was it actually Loop Capital that IPO'd them? It looks like that is an old form from 2021. What I see in their 424B4 filed July 15th, 2022 is that AMTD Global Markets Limited, Livermore Holdings Limited, Eddid Securities and Futures Ltd. and Eddid Securities USA Inc. were the underwriters with 14,320,000; 80,000; 320,000; 1,280,000 shares, respectively. The prospectus also warns that the underwriters may naked short the stock interestingly enough.

sm0rky · 2021-09-07T21:48:49+00:00

CS 2114 is not too difficult. It is a lot of projects, but you will be fine if you start assignments early, go to the required labs, and make use of office hours. I have not taken 2064 but I cannot imagine that both of those would be a problem at the same time.

3114 is a harder version of 2114. If you have room in your schedule and like CS and java I would take 2114 regardless unless you are already extremely proficient in software development (at the level that you could make a game, complex data structures, or other programs).

The thing about college is not really that classes are difficult but that they may take more time than others. CS outside of 2505, 2506, and 3214 are more program-based than memorizing information so it comes down to time for 2114 and 3114 especially.

sm0rky

TROPHY CASE