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Last week’s 8-K filing revealed GameStop are actively assisting the SEC with an investigation into ongoing manipulation of their share price. They even disclos

by jw1224 5y ago

Last week’s 8-K filing revealed GameStop are actively assisting the SEC with an investigation into ongoing manipulation of their share price. They even disclosed to investors the risk of a further short squeeze on their stock. If they don’t have reason to believe that’s a possibility, it would never have been put on the record in a public filing.

WJW 5y ago
They can believe it is an exceedingly remote possibility but nonetheless put it in the filing just in case. These filings contain many risk statements about events that do not eventually come to pass. In addition, assisting the SEC about 'ongoing manipulation' can just as easily mean that the SEC may be considering mass hyping of the stock through reddit to be manipulation. It does not mean that there is definitely shady stuff going on that GameStop is worried about.
- jw1224 5y ago
  Both fair points, thanks for your comment. GameStop’s filing did note the following [1]: “the inquiry is not expected to adversely impact us” I feel this is a statement they would be unlikely to make if they felt the SEC’s investigation was likely to result in retail sell-offs. They’ve been able to use the recent dramatic increase in their share price to pay off $216m in debt a year early, and add a further $551m to their bank account. Plus, they’re currently in the process of raising an additional $1.1bn from additional share sales. The SEC themselves have commented on the investigation too [2]: "SEC staff continues to monitor the market in light of the ongoing volatility in certain stocks to determine if there have been any disruptions of the market, manipulative trading, or other misconduct," a spokesperson for SEC said in a statement. "In addition, we will act to protect retail investors if violations of federal securities laws are found." That last sentence leaves me feeling optimistic. [1] https://www.bloomberg.com/news/articles/2021-06-09/gamestop-says-sec-is-investigating-trading-of-its-shares https://www.bloomberg.com/news/articles/2021-06-09/gamestop-... [2] https://www.reuters.com/world/us/us-sec-says-observing-market-meme-stocks-rally-2021-06-07/ https://www.reuters.com/world/us/us-sec-says-observing-marke...
  - dmurray 5y ago
    > I feel this is a statement they would be unlikely to make if they felt the SEC’s investigation was likely to result in retail sell-offs. I think that's a major misunderstanding of how the statement works. Gamestop think the SEC inquiry won't affect their business - they aren't making any claims about its effect on their stock price. In a normal world, these would be close to equivalent, and you could interpret the statement as "this will not impact us to an extent that is material to our stock price", but that's not OK to do here.
    - jw1224 5y ago
      If there was a significant retail sell-off right around now that caused the share price to plummet, it would directly affect their business transformation plans. They are currently completing an at-the-market offering for 5,000,000 shares, as a means to raise capital to fund their new digital strategy. We don’t know how long this will continue to go on for. You may or may not be aware of this, but their new chairman is on a major recruitment drive and is taking on many new technology-focussed executives (lots of former Amazon execs, a total change in perspective for a brick-and-mortar retailer that was nearly bankrupt last year). This has all been disclosed in their recent filings — and so as I understand it, at the present moment their share price is directly linked to the performance of their business. Ultimately, though — I’m just speculating. This is far from the only indication they’ve given that retail investors needn’t worry. Just some food for thought. I wouldn’t normally give much weight to this if it weren’t also for everything else they’ve got going on at the moment. Time will tell!

by jw1224 5y ago

WJW 5y ago

They can believe it is an exceedingly remote possibility but nonetheless put it in the filing just in case. These filings contain many risk statements about events that do not eventually come to pass. In addition, assisting the SEC about 'ongoing manipulation' can just as easily mean that the SEC may be considering mass hyping of the stock through reddit to be manipulation. It does not mean that there is definitely shady stuff going on that GameStop is worried about.

jw1224 5y ago
Both fair points, thanks for your comment. GameStop’s filing did note the following [1]: “the inquiry is not expected to adversely impact us” I feel this is a statement they would be unlikely to make if they felt the SEC’s investigation was likely to result in retail sell-offs. They’ve been able to use the recent dramatic increase in their share price to pay off $216m in debt a year early, and add a further $551m to their bank account. Plus, they’re currently in the process of raising an additional $1.1bn from additional share sales. The SEC themselves have commented on the investigation too [2]: "SEC staff continues to monitor the market in light of the ongoing volatility in certain stocks to determine if there have been any disruptions of the market, manipulative trading, or other misconduct," a spokesperson for SEC said in a statement. "In addition, we will act to protect retail investors if violations of federal securities laws are found." That last sentence leaves me feeling optimistic. [1] https://www.bloomberg.com/news/articles/2021-06-09/gamestop-says-sec-is-investigating-trading-of-its-shares https://www.bloomberg.com/news/articles/2021-06-09/gamestop-... [2] https://www.reuters.com/world/us/us-sec-says-observing-market-meme-stocks-rally-2021-06-07/ https://www.reuters.com/world/us/us-sec-says-observing-marke...
- dmurray 5y ago
  > I feel this is a statement they would be unlikely to make if they felt the SEC’s investigation was likely to result in retail sell-offs. I think that's a major misunderstanding of how the statement works. Gamestop think the SEC inquiry won't affect their business - they aren't making any claims about its effect on their stock price. In a normal world, these would be close to equivalent, and you could interpret the statement as "this will not impact us to an extent that is material to our stock price", but that's not OK to do here.
  - jw1224 5y ago
    If there was a significant retail sell-off right around now that caused the share price to plummet, it would directly affect their business transformation plans. They are currently completing an at-the-market offering for 5,000,000 shares, as a means to raise capital to fund their new digital strategy. We don’t know how long this will continue to go on for. You may or may not be aware of this, but their new chairman is on a major recruitment drive and is taking on many new technology-focussed executives (lots of former Amazon execs, a total change in perspective for a brick-and-mortar retailer that was nearly bankrupt last year). This has all been disclosed in their recent filings — and so as I understand it, at the present moment their share price is directly linked to the performance of their business. Ultimately, though — I’m just speculating. This is far from the only indication they’ve given that retail investors needn’t worry. Just some food for thought. I wouldn’t normally give much weight to this if it weren’t also for everything else they’ve got going on at the moment. Time will tell!