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Fails to deliver in shares of GameStop Corp. nearly doubled in the latest report from the SEC.
Shares that failed to clear numbered over 43,000 by February 14th, the end of the reporting period. That is up from 24,000 at the end of the prior period, a substantial increase.
The number of failed trades in GameStop shares is unusually large for a company its size. By way of comparison, here are the fails to deliver at the end of the period for some of the largest stocks in the market:
Alphabet Inc: 0
Amazon.com Inc: 4,000
Apple Inc: 21,410
Nvidia Corp: 0
Tesla Inc: 143
Keep in mind, these companies have market caps orders of magnitude larger than GameStop’s. If anything, their fails to deliver should be much greater.
So why does this small stock have such large and persistent fails to deliver? Failed trades can happen for various reasons, some of them benign.
But when there is a long term pattern of huge numbers of failed trades, it can be a sign of naked short selling. This mostly illegal practice involves selling short shares you did not borrow.
The trade never clears because the shares never existed! Meanwhile, you can short endlessly without needing to find shares to borrow.
Naked short selling allows a trader to push down a stock’s price, big time.
I suspect hedge funds are using this illegal strategy to drive down the shares of GameStop, AMC Entertainment Holdings Inc., and other meme stocks. But with the FBI and SEC circling, it may be only a matter of time before they’re caught.
Have a great weekend everyone, and see you Monday! 🙂
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More on markets:
Citadel Under Federal Investigation
How DTCC Makes Fails to Deliver Disappear
Photo: “Retail GameStop” by ccPixs.com is licensed under CC BY 2.0
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