Say what you want about GameStop’s loyal individual investor base, they are definitely keeping a close eye on things.
Every SEC filing, every court case, every job board, every news release, every GitHub update – any bit of information that has to do with their favorite stock is quickly detected and discussed by the colossal following in various GameStop-oriented subreddits.
They aren’t the only ones tirelessly checking the forums for new information. Topics that gain traction in the individual investor community often find their way into headlines of mainstream media sites including Motley Fool, MarketWatch, Investor’s Place, CNBC, and others.
How strange then that the very community these publications depict as reckless, mindless hype followers is one that they depend on for news. For almost a year now, mainstream financial publications publish several articles per week with news and updates plucked straight from GameStop stockholder community.
Even more perplexingly, these institutional publications’ articles only address these topics to dismiss them as invalid without providing any real basis for doing so.
Most recently, the GME investor base discovered something in Fidelity’s data that raised questions. The response by the media was revealing to say the least. It falls in line with an alarming trend of massive GameStop glitches in data reporting.
Fidelity’s GameStop glitch: Shares available to borrow
On Monday, November 29, 2021, the top post across several GameStop-focused subreddits centered around the number of shares stockbroker Fidelity listed as ‘available to borrow.’ Stock brokers lend their account holders shares out to short sellers who in turn use them to artificially distort supply-demand dynamics with the goal of driving stock prices down. Short selling has been at the center of the GameStop saga since long before it caught significant traction with retail investors in late 2020.
Fidelity had mistakenly listed 13,767,545 GameStop shares as available to borrow to short sellers. That figure represents more than 20% of GameStop’s float. Fidelity is just one broker. Interactive Brokers, for example, listed 500,000 of their account holders’ shares as ‘available to borrow’ that day as well.
Almost fourteen million shares is significantly above Fidelity’s average range of lendable GameStop shares, which hovered between one to three million shares for most of 2021. GameStop shareholders had a very reasonable question: Where did Fidelity get these millions of extra shares, which the broker itself labels as ‘hard to borrow’?
MarketWatch, the Wall Street megaphone
MarketWatch writer Thornton McEnery writes that it was “pretty cringey to see that a growing band of retail Apes spent much of Tuesday morning ignoring the macro bloodbath across indexes and combing through what they thought looked like a fishy discrepancy on Fidelity’s platform, regarding GameStop,” in an opinion piece published eight hours after the topic rose to the top of GameStop-oriented subreddits. He then goes on to quote then ridicule various Redditor comments and points of discussion on the matter. The irony, hypocrisy, and cringiness of the piece must have been lost on McEnery.
Additionally, McEnery is dismissive of the $2.2 billion, 11 million share discrepancy the GameStop shareholders flagged, describing it as “what they thought looked like a fishy discrepancy.”
He goes on to clear the air with the satisfying and purely speculative explanation: It might have just been a harmless case of someone “fat-fingers a keystroke and few zeroes get added.” He goes on to say that it “happens all the time, even in the highest echelons of finance.” Apparently, individual GameStop investors questioning a 20%-of-the-float error as something that warranted an explanation seemed amateurish and beneath McEnery to offer any real information on.
Nothing says quality reporting like describing a $2.2 billion data discrepancy as an “oopsie,” then redirecting the narrative to discrediting the people who discovered the discrepancy in the first place.
But in case MarketWatch‘s explanation left something to be desired for GameStop shareholders – or anyone with a preference for meaningful financial reporting and accountability – Fidelity would eventually respond to the numerous inquiries regarding the mysterious 11 million GameStop shares listed as available to borrow.
However, it was less of an explanation insomuch as it was a recap of events followed by a shift of blame for the glitch that represents about 13% of GameStop’s total market cap. According to a response written by Scott Ignall, Fidelity’s Head of Retail Brokerage, the cause of the 11 million share “data anomaly” was that “one of [Fidelity’s] counter-parties provided an erroneous number for GME.”
In another post about the GameStop data glitch, Fidelity’s official response notes “…that error caused the number of short-able shares to be overestimated by approximately 11,000,000.”
That’s a pretty big overestimation! So it wasn’t “what they thought looked like a fishy discrepancy” after all. It was a bona fide, massive, $2.2 billion GameStop glitch that was only corrected after GameStop individual investors noticed it and raised the issue with Fidelity. Moreover, it was yet another glitch that benefited short sellers and brokers and hurt real GameStop investors, as all GameStop glitches curiously do.
Outraged GameStop individual investors pressed Fidelity for more information. Fidelity later posted the following reply to their subreddit:
In another response post from Fidelity, the company said:
“After researching the volume with our lending services team, we were able to identify that the root cause was an incorrect entry of the number of shares available to short by one of our external counterparties. The issue was fixed by 12:10pm ET today. The GME shares available to short is now correct on the trade ticket.” – Fidelity response to GameStop glitch
Interestingly, that day, the stock had been in a steady decline until precisely 12:10 p.m., at which point the stock bottomed out, the reversed trend, regained all the losses up through 12:10 p.m., and ended the day up 1.15%.
GameStop glitches are frequent and large
MarketWatch‘s coverage of the Fidelity fiasco is right in one regard. When it comes to GameStop, these types of data discrepancies – or “oopsies” – do indeed happen “all the time.” But where MarketWatch is wrong is that these glitches are frivolous and investors should pay no mind.
To better understand why GameStop shareholders are so committed to their ongoing due diligence and thesis about the stock, context is key. Monday’s Fidelity fiasco was hardly the first massive discrepancy investors discovered in GameStop stock trading activity. In fact, it wasn’t even the third largest by share volume.
There were two other well-documented “glitches” involving large volumes of GameStop stock appearing in the data. Despite being brought to the attention and indeed, corrected by various data providers and brokers, none has been able to provide a satisfactory explanation as to why the discrepancy occurred in the first place.
One million deep out-of-the-money GameStop puts in the Bloomberg Terminal, July 2021
Back in late July, another major GameStop glitch was observed by individual investors. This time, it was first noticed in a Bloomberg Terminal.
Two Brazilian hedge funds, Constansia Investimentos and Kapitalo Investimentos, popped up for the first time in the Terminal’s GameStop options data on July 28, 2021.
Both firms were an holding exceptionally high volume of put options contracts (put options contracts bet the stock price will go down) on GameStop stock. Between the two of them, they held almost 1.1 million put option contracts.
To put that in to perspective, one option contract represents 100 shares. Those 1.1 million contracts represent 110 million GameStop shares – 143% of the total number of GameStop shares in existence.
But by the next trading day, July 29, 2021, both firms and their massive put positions were gone from the Terminal.
However, also on July 29, 2021, a new name popped up in the Terminal data on GameStop’s option chain. This newcomer also carried a massive put position: 540,000 contracts. Like the Brazilian firms, this GME options-chain guest star would only stay in the Bloomberg Terminal for one day.
By July 30, 2021, they too had vanished. That stealthy one-day appearance that immediately followed the Brazilian firms cameos was none other than Credit Suisse – the very neutral champions of financial discretion and privacy.
The three firms, holding over 1.6 million put contracts representing more than double the total GameStop shares oustanding, came and went in a 48-hour time frame.
One GameStop individual investor’s due diligence
One inquisitive investor did what many investors once thought the financial media might do. They looked into it.
Redditor u/lawsondt emailed the Bloomberg Terminal support team about the one-day cameo firms and the massive GameStop put positions they held. In their initial outreach to the Bloomberg support team, the Redditor notes several peculiarities, as well as some strange commonalities, the three fruit-fly firms had.
Firstly, all three firms carried massive GameStop put positions. Secondly, they were the only three institutional put holders that reported strike prices and expiration dates on their put positions. Additionally, all three only appeared in the Bloomberg terminal for one day.
“Can you please explain what happened with the GME put positions on July 28 and July 31, 2021?” u/lawsondt writes to Bloomberg’s support team after outlining what they’d witnessed in the Terminal.
“The ownership of those GameStop options by those Brazilian funds was a bug and has been addressed,” a Bloomberg Portfolios Data Team representative responds, later adding: “None of those puts should have been displayed as they were not puts on GME…Those 540,000 puts [Credit Suisse’s holdings] were not supposed to reference GME and be on this page in the first place, so they were removed. This issue was isolated to GME.”
While the Bloomberg representative explains how Terminal data is collected, the explanation doesn’t address how three different firms holding hundreds of thousands of GME put positions would briefly and erroneously register in the data.
The Bloomberg bug, Fidelity fiasco, and MarketWatch‘s ‘oopsies’ are insufficient explanations for the GameStop glitches that leave much to be desired, raising more questions than answers. The trend appears to be: GameStop investors discover these glitches and raise concern, the numbers are quickly “corrected,” and no meaningful explanation is given.
Whenever GameStop individual investors press for answers, they are routinely delayed for time, given fluff answers, and passed around company representatives. Despite Fidelity and Bloomberg reactively making massive corrections – representing more than double GameStop’s total shares outstanding between them – the financial media either doesn’t report on it at all, or portrays individual investors as mistaken and reactionary in their findings.
But as Upside Chronicles recently learned, this would not be the last of u/lawsondt’s correspondence with the Bloomberg support team, nor of GameStop’s chronic ‘data glitch’ problems.
Yahoo! Finance GameStop Glitch, September 10, 2021 – September 13, 2021
On September 12, 2021, a commotion broke through GameStop subreddits. Another massive discrepancy had been discovered and confirmed by numerous GameStop individual investors on Reddit. This would be the biggest GameStop glitch reported to date.
That Sunday night, Yahoo Finance! reported total shares outstanding for GameStop as 249.51 million shares. According to GameStop’s most recent 10-Q filing, the company has only ever officially issued 76.49 million shares.
Yahoo! Finance’s data was over-reporting the shares outstanding by 226%. Short selling adds artificial (borrowed) shares into circulation. It stands to reason then, that the additional 173 million shares over the company’s shares outstanding were borrowed shares in circulation – short positions.
Shifts in GameStop’s option chain
Upside Chronicles obtained historical options chain data for the Friday before and Monday after the Yahoo! Finance glitch was discovered.
On Friday, September 10, 2021, the total open interest (all strike prices, all expirations) for GameStop call contracts was 298,063. Total open interest on puts at opening was 568,900. By closing on that day, the open interest call-put numbers stayed exactly the same.
By opening of the next trading day, Monday, September 13, 2021, total open interest on calls had skyrocketed to 529,089. Total open interest on put contracts had dropped to 529,058.
At market open that Monday, the total open interest for call and put contract were almost one to one. Yahoo! Finance’s data was corrected to a much more “in line” float of 61.2 million.
By the end of Monday’s trading session, there were 768,774 open interest call contracts on the GameStop options chain – a 257% increase in calls across the entire chain within one trading day.
Another GameStop glitch in the Bloomberg terminal
That weekend, u/lawsondt was looking at Bloomberg Terminal data on GameStop options.
And once again, they noticed something. They resume correspondence with Bloomberg’s support team.
“More put options appeared than disappeared over the last 24 hours for GameStop stock,” u/lawsondt writes. “…In full disclosure, there have been several SEC complaints filed alleging illegal options for $GME stock used to reset Reg SHO Close-Out Obligations as described by the SEC on August 9, 2013.”
Five business days later, he got a response. Bloomberg would change the representative looking into the matter. From that point on, Bloomberg only responds to u/lawsondt’s follow ups with requests for more time. By October 1st, they still had not provided an answer. Full correspondence here.
GameStop glitch: Totals and timelines
Between the Fidelity fiasco, the Bloomberg Terminal “bug,” and the Yahoo! Finance data glitch, the leading finance industry data providers have corrected errors that reflect a total of 351 million GameStop shares – more than 450% of the total GameStop shares in existence. At GameStop’s current trading value (approximately $180), the total sum of “oopsies” and “bugs” amounts to more than $63 billion worth of data glitches relating to GameStop stock in the last four months alone.
GameStop investors are right to raise concern and continue their due diligence, as all investors should in anything they are invested in. Ultimately, these were not “what they thought looked like a fishy discrepancy.” On the contrary, what GameStop investors have discovered multiple, concrete, data-backed fishy discrepancies that required corrective action by Bloomberg, Yahoo! Finance, and Fidelity once GameStop individual investors asked about them.
Of concern to all investors
Glitches of this magnitude aren’t just the concern of GameStop investors – they should be of concern to all investors, especially if as MarketWatch states, “it happens all the time.” How can anyone trust the markets and those that run them with this level of “error” occurring being the best-case scenario?
Why is it that these errors seem to always be one-sided? Were they truly snafus, it would stand to reason that every now and again, they would happen in a way that favors GameStop’s real investor base – not consistently for the short sellers trying to erode the value of the company.
Dark pool activity has increased by 400% over historical averages beginning in 2021. Share volume trading hands exploded around the same time. The average number of shares traded per quarter in 2020 was about 70 billion. Starting in Q1 of 2021, that number skyrocketed to approximately 500 billion shares per quarter – a seven fold increase, according to FINRA data. That means that GameStop individual investors have been and will remain at significant information disadvantage as Wall Street pulls more and more trading activity into obfuscation. [See Upside Chronicles‘ dark pool report here.]
The level of secrecy in the so-called public markets is alarming. Markets needs more accountability and transparency. While GameStop investors might be keeping the closest eye on every metric relating to the stock, if it can happen here at this magnitude, it can happen elsewhere to this magnitude.
The financial sector seems to have forgotten that these aren’t just numbers on a screen and games – what happens in the market affects real people’s lives, jobs, savings, health, quality of life, and American prosperity at large. The market needs more watchdog groups like the GameStop individual investor base, not less of them. That the groups responsible for investigating illegal activity in the markets – the SEC and financial press – have either ignored these issues or worse, ridiculed those doing their jobs for them, should be enough for any investor with any semblance of faith left in American financial markets to pull the fire alarm.
Where the GameStop saga will go from here remains to be seen. But one thing does seem certain: It’s not over yet.
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