Crypto hints being dropped in GME’s Prospectus?

CategoriesGME

From: https://www.reddit.com/r/Superstonk/comments/o933f5/crypto_hints_being_dropped_in_gmes_prospectus/?context=3

Major Edit

Based on a lot of the replies, I need to clarify something that I failed to clearly state.

This is opinion, not fact, and I have changed the flair to “Discussion” to try and make that more clear.

If GME does announce something along these lines, they will make it obvious. What I wrote below is about what I think are hints at what might come. I believe these pieces show that GME left options open to be explored, and I am hyped because I previously did not see a workable way to make these sorts of things happen.

Until GME actually makes something official, don’t go buying some crypto nonsense that looks like it might be related. It isn’t, you’re just getting scammed. Wait for the real deal! Who knows – maybe MOASS strikes without any catalyst at all.

I am hyped, I hope you’re hyped, but don’t waste your money on scams.

Original post below:

Someone, anyone, please rain on my parade. I want to be proven wrong here. Seriously, my body was not prepared for this.

From a recent GME filing with the SEC, page 16:

Any underwritten offering may be on a best efforts or a firm commitment basis. We may also offer securities through subscription rights distributed to our stockholders on a pro rata basis, which may or may not be transferable. In any distribution of subscription rights to stockholders, if all of the underlying securities are not subscribed for, we may then sell the unsubscribed securities directly to third parties or may engage the services of one or more underwriters, dealers or agents, including standby underwriters, to sell the unsubscribed securities to third parties.

Then later on page 17:

Unless otherwise specified in the related prospectus supplement, each series of securities will be a new issue with no established trading market, other than shares of our common stock, which are listed on the New York Stock Exchange, or NYSE. Any common stock sold pursuant to a prospectus supplement will be listed on NYSE, subject to official notice of issuance. We may elect to list any series of preferred stock on an exchange, but we are not obligated to do so. It is possible that one or more underwriters may make a market in the securities, but such underwriters will not be obligated to do so and may discontinue any market making at any time without notice. No assurance can be given as to the liquidity of, or the trading market for, any offered securities.

The real kicker, however, comes just a tad beyond that. Please indulge a little bit of background text:

We may enter into derivative transactions with third parties, or sell securities not covered by this prospectus to third parties in privately negotiated transactions. If disclosed in the applicable prospectus supplement, in connection with those derivative transactions third parties may sell securities covered by this prospectus and such prospectus supplement, including in short sale transactions. If so, the third party may use securities pledged by us or borrowed from us or from others to settle those short sales or to close out any related open borrowings of securities, and may use securities received from us in settlement of those derivative transactions to close out any related open borrowings of securities. If the third party is or may be deemed to be an underwriter under the Securities Act, it will be identified in the applicable prospectus supplements.

Until the distribution of the securities is completed, rules of the SEC may limit the ability of any underwriters and selling group members to bid for and purchase the securities. As an exception to these rules, underwriters are permitted to engage in some transactions that stabilize the price of the securities. Such transactions consist of bids or purchases for the purpose of pegging, fixing or maintaining the price of the securities.

Underwriters may engage in overallotment. If any underwriters create a short position in the securities in an offering in which they sell more securities than are set forth on the cover page of the applicable prospectus supplement, the underwriters may reduce that short position by purchasing the securities in the open market.

The lead underwriters may also impose a penalty bid on other underwriters and selling group members participating in an offering. This means that if the lead underwriters purchase securities in the open market to reduce the underwriters’ short position or to stabilize the price of the securities, they may reclaim the amount of any selling concession from the underwriters and selling group members who sold those securities as part of the offering.

OK. That’s a lot of legal BS, but it is relevant because it shows that whatever securities are being issued, they will still be traded along rules that seem to be relatively consistent with the rules of trading traditional securities. It does, however, also indicate that there’s a certain amount of leeway for the “lead underwriter” to impact the specifics of how those trades can happen. Why is that relevant?

Crypto Distribution goes BRRRRRRRR:

In general, purchases of a security for the purpose of stabilization or to reduce a short position could cause the price of the security to be higher than it might be in the absence of such purchases. The imposition of a penalty bid might also have an effect on the price of a security to the extent that it were to discourage resales of the security before the distribution is completed.

Reading this, it sounds like GME is discussing their right to issue some sort of potentially transferable security to their existing shareholders, and that there may not even be an existing market for those securities. Plus, it reads like the distribution process will have controls in place that might result in short sellers’ positions becoming more expensive.

Most critically, and most tactically awesome: this isn’t a compulsory program. Nobody is compelling the brokers to participate in this, but it sounds like “the distribution” won’t be complete until all shareholders get their portion of these securities.

Link to the relevant portion of the Prospectus here:

Prospectus

TL;DR

This sounds like GME is discussing the creation of a new crypto market, where every shareholder is entitled to some number of “coins” based on their stock positions. Brokers don’t have to participate, but it sounds like there are some steep penalties for brokers on the crypto exchange until every shareholder gets their distribution. To my addled brain, this sounds like it creates a race to cover – the faster you get in, the more likely you’ll be able to cover your short positions at a reasonable price.

If I am wrong, please tell me. I want to understand, I don’t want to spread nonsense.

ELI5:

It sounds like GME is creating a new crypto currency to give to shareholders, and they’re making sensible rules for how that currency is traded. These rules sound like they’ll cause the crypto currency to squeeze as soon as the market opens, but then the market will find stability once the shareholders get their fair share.

ELIA:

Your shares get you GMECoins. GME coins squeeze. Apes get paid. Hedgies r fuk.

EDIT1:

Shout-out to u/ShartLadder – Thanks for pointing out the dividend discussion!

Leave a Reply

Your email address will not be published.

This site uses Akismet to reduce spam. Learn how your comment data is processed.