| Author | Source |
|---|---|
| u/Scalpel_Jockey9965 |
I saw a DD over the weekend which was mainly about when the shareholder meeting may be and when a share recall could be predicted.
https://www.reddit.com/r/GME/comments/mjibu7/gamestop_confirms_annual_shareholder_meeting_is/
However, buried in this wonderful DD was a short bit about last year’s share recall and why Blackrock and other whales did not end up demanding their shares back.
Sorry for the paywall. However, one of the main points was the discussion that the borrowing fee was super high during this time period ~70-100%. Therefore it made more sense for BR and others to keep making money on these fees and forfeit their voting rights. Here is a direct quote from the article.
“With regard to the relationship between securities lending and proxy voting, BlackRock’s approach is driven by our clients’ economic interests. The decision whether to recall securities on loan to vote is based on a formal analysis of the revenue producing value to clients of loans, against the assessed economic value of casting votes. Generally, we expect that the likely economic value to clients of casting votes would be less than the securities lending income, either because, in our assessment, the resolutions being voted on will not have significant economic consequences or because the outcome would not be affected by BlackRock recalling loaned securities in order to vote. BlackRock also may,* *in our discretion, determine that the value of voting outweighs the cost of recalling shares**, and thus recall shares to vote in that instance.”
Folks, the borrowing rate at around the time of recall last year was topping out between 70% and 100%. Therefore, Blackrock decided that the gains from the borrowing fees outweighed the gains from voting rights.
Because the decision whether to recall securities is based on a formal analysis, BR can’t decide just willy nilly whether to recall their shares, there has to be numbers to back it up.
Well…. Let’s say that you did want to have your voting rights this year during an ecommerce transformation and a possible vote on a new CEO. How can you ensure that your formal analysis would push the decision in the way you want?
You getting where I’m going?
By suppressing the borrowing fee to ~1%, shareholders who are having their securities lent out aren’t really earning that much on having these shares on loan. Therefore, it would make way more sense to follow through with a share recall. That means the potentially millions of shares of GME loaned out by Blackrock could all be recalled all within a short period of time. 🚀🚀🚀🚀
Edit: Thank you to u/Old-Lawfulness-8923 who sent me some info. Brokers are able to set lending fees as they see fit. However, depending on whether the security is hard to borrow or not, there is a minimum borrowing fee set by the fed which can go up but usually isn’t much more than 1%. How much higher than the minimum is set by the broker aka BR. (https://ibkr.info/article/41)
TLDR: Blackrock and other long whales may have been purposely suppressing the borrowing fee to justify a share recall for the upcoming shareholder meeting in June.
Obligatory 🚀🚀🚀🚀🙌💎