By Thornton McEnery
UPDATE: Please scroll to the bottom for an answer to this mystery…
Listen, mistakes happen all the time, even in the highest echelons of finance.
Someone fat-fingers a keystroke and few zeroes get added to a buy or sell order, or a trading-floor intern drops coffee on a disgruntled VP who then calls out for a move on the wrong stock, or a bank executive goes to a picnic with a mysterious client on his private Caribbean island, or that one time Standard & Poor’s mistakenly downgraded France…the country.
But if you’re Fidelity Investments — and you’ve spent much of 2021 pulling in a steady stream of retail investors, thanks in huge part to Robinhood’s /zigman2/quotes/228268942/composite HOOD +2.56% January buttfumble that resulted in trading restrictions on popular names at the height of the meme-stock short — the last thing you want to do is give those retail Apes a reason to lose trust in you.
And you definitely don’t want to do it on a stock like GameStop /zigman2/quotes/203755179/composite GME +2.92% .
Which makes it 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.
“WTF?! CAN SOMEONE EXPLAIN WHERE THESE SHARES CAME FROM?” queried user Hamberere on GameStop subredddit r/Superstonk late Tuesday morning, sharing a screenshot of their Fidelity account, which showed almost 13,767,545 shares available to short.
For pro-GME Apes who have spent 10 months trying to keep short sellers from getting their hands on GameStop shares — and going so far as to transfer their accounts to Fidelity and even direct-register them to keep them locked away — this was a shockingly high number of available shares, and well more than the 2 million that were available on Monday evening.
Reddit low-key exploded with users speculating that the shares they had attempted to DRS were being lent out by Fidelity, or that the brokerage was misleading them in other ways, or that some big hedge fund had covered its short position (which was a tough one to buy considering the stock is now down over 19% in the past five days).
Fidelity appears to have spent Tuesday experiencing an influx of calls from furious retail investors and enduring a rough day on social media, because something was amiss with GameStop in 2021.
And the company’s early attempts did not calm nerves, with a midday response to angry customers on Reddit explaining how Fidelity computes shares available, something most Reddit Apes are intimately aware of by now.
But by the afternoon, a clarification was available.
“Today, 11/30, our trade ticket reflected an incorrect number of GME shares available to short,” read a post on Fidelity’s own subreddit, posted just after 3:30 p.m. Eastern. “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.”
And the company even clarified perhaps the most important concern for retail folks.
“We can confirm that the number of shares borrowed never exceeded the actual amount that were available.”
While that explanation was more fulsome, it did not go over great.
And Wet Dirt Kurt was not alone, making it clear that social media on Wednesday will almost certainly be filled with some internet sleuthing to find the external counterparty at fault for the error; one post has already provided a clue for what flavor of speculation will dominate:
“Photo Leaked of Fidelity Intern In Charge of Data Entry,” blared on post on r/Superstonk and accompanied by a headshot of Citadel founder/Ape archenemey Ken Griffin, photoshopped with a curly mustache.
But Reddiit is already buzzing with an emboldened campaign among Apes to keep direct-registering their GME shares and keep them out of the hands of anyone looking to borrow and short them.
That campaign got a boost on Tuesday afternoon, and Fidelity ended up with a hole in its dadcore-reputation armor.
Wednesday should be interesting for everyone involved.
UPDATE: Wednesday was very interesting as we learned who the mysterious counterparty was late in the evening…and it was maybe the name nobody had on their list of suspects.
“Due to a clerical data entry error, yesterday we provided Fidelity with the incorrect “potential securities lending availability” data for Gamestop (GME),” a Vanguard spokesperson wrote in an exclusive statement. “The error was corrected shortly thereafter and before the markets opened. We regret this error occurred and apologize for any confusion this may have caused.”
So in the end, it turns out that discrepancy was apparently a data snafu between Fidelity and Vanguard, possibly the most stentorian and hot drama-averse names in American finance.
Nonetheless, Thursday is now almost upon us and we’re ready for all the hot takes,