Repost from beginning of November.

Edit 2023-11-22: I might have missed something. Interestingly, in the new Teddy vol 2 TOYS is shown... might it actually be a trap for shorts?

Thx to wtfeweguys:

End edit.

Original title: Shorts R US - The Geoffrey Files Part 3 - The reports of Geoffreys nearing death might be actually true - Doug Cifu trades “nice” in September, only (a) month(s) in run way, death trigger in place, management with risk free compensation?!

I just went quickly through the annual report of TOYS R US (see https://wcsecure.weblink.com.au/pdf/TOY/02734815.pdf where all further references without additional link are for) and wow... this doesn't look good from a financial perspective. Wow... I have to share what I found.

Please remember, do your own due diligence. I am no financial adviser and this is not financial advice.

TL;DR: This company is borderline (a trap?), Doug Cifu trades “nice” in September, equity lowered by 96% or $32m, 1.7 months in run way (time till out of money) at the time of the annual report, debt increased and shifted to very short term debt, whole management receives mainly risk free compensation.

Topics:

• There is no float, Neo.
• Doug Cifu trades “nice” in September
• More debt, less equity
• Only (a) month(s) in run way (as of annual report)
• So, wen profitable?
• Who owns the debt? A death trigger?
• What about their US comeback?
• Execs with risk free compensation

There is no float, Neo.

Please check back on Part 1 (ppsub) and Part 2 (ppsub) if you haven’t. This also mixed with the info from the annual report that the top 20 holders own 72% of the shares.

(p. 89)

Okay, if this is all a sign of high short interest, is this a bullish sign? We know of certain activist investors that they like leaders to put their money where their mouth is, that risk free compensation probably will not lead to the best outcome for the company. And we know that shorts like to put a company to bankruptcy. So lets shortly go through some parts of the annual report and see how it looks like. Feel free to correct me and point out any important things I missed or got wrong.

Also is there some way the debt could be turned to something good like supposedly in BBBY with the NOLs?

Doug Cifu trades “nice” in September

Market Statistics - Monthly Share Volume (finra.org)

Why should he do this? Ah, remember his meltdown on X? Maybe it’s rather the same impulse which lead him to do this… maybe not.

More debt, less equity

What blew my mind was on page 6. Leverage blew through the roof. From a moderate debt/equity ratio of 29% to 831% from FY22 to FY23

What did they do?

The balance sheet is a total mess… cash is gone, equity is nearly gone. Their borrowings went up.

(p. 28)

And it widened to $54m in two years.

(p. 29)

(p. 73)

Build up debt, scale down assets… the new key to success?

Also exchanging long term debt for higher interest rate short term debt, right?

(p. 76)

So they surely have massive countermeasures in place, right? They have massive countermeasures in place, right?

Oh nice… so during the course of one year the equity went down 96% or $32m while taking on $15.8m additional debt. Now their plan is to get rid of the UK business which will reduce loss by $6m, which brought in $5.3m. Wtf?

They are loosing roughly $1m/month (while operating activities might be seasonality).

Only (a) month(s) in run way (as of annual report)

So what is the financial runway left? (Total Capital ÷ Monthly Operating Expenses = Runway)

1,766 / (12,465 / 12) = 1.7 months

Wow.

So, wen profitable?

(p. 8)

(p. 2)

Breakeven by 2025? How do they want to survive with such high short-term debt, risk-free compensation and high burn rate?

Who owns the debt? A death trigger?

(p. 9)

(p. 63)

Ah, there is a death trigger.

The lender seems to be TRU Kids Inc (TRUK). See p. 71. If someone wants to dig in.

Losses as an asset?

(p. 63)

What about their US comeback?

In short... no.

(p. 68)

Execs with risk free compensation

(p. 18)

(https://wcsecure.weblink.com.au/pdf/TOY/02688802.pdf)

Edit: as of 17.11. Pen Cox got granted vested 14.5m shares. For a price of $0.011 AUD thats 160k AUD vested over the next years.

Well you could argue that the 40-80% variable Renumeration might be risk based, but there is no clear indication it will be.

There is no huge stock package with vested options and she gets roughly the same base as Matt Furlong got at GME for comparison.

This ends with: I would recommend for everyone to READ THE ANNUAL REPORT (https://wcsecure.weblink.com.au/pdf/TOY/02734815.pdf), dig into the available information.

TL;DR: As seen in Blurring DD part 3 a free and fair market will be on a self-custodial defi blockchain (link see below) which needs to be built on an open source platform. This will render nearly everything in the short toolkit useless. Stocks will no longer behave like infinite fiat money supply where you can always borrow more, but rather a finite share of a company. One thing left to them are (meme) stock traps. We have to begin understanding them. The DD has just begun.

Topics:

• A really free and fair market
• How would shorting work in such a market?
• Comparing todays short technics with those in a free and fair market
• What is left for shorts and how can we be one or two steps ahead?

A really free and fair market

First I want to thank the team of DRS GME, especially chives who went through several iterations of the post with me. I started writing it in mid 2022 and happy to share the thoughts now.

Counterfeit Shares 2.0 lists a lot of ways to create a counterfeit share. During the last years we got ample evidence that this is how the stock market operates (see last DD https://lemmy.whynotdrs.org/post/331876/). Looking at the loopring whitepaper (https://loopring.org/resources/en_whitepaper.pdf) and imagine a stock exchange based on self-custodial wallets and decentralized exchanges there eventually cannot be counterfeit assets, given certain conditions (see below). In this environment Fails to Deliver, Settlement Fails, Wrong labeling, False Locates, Naked Options and Perpetual Rolling may not occur. For context this is all about the loopring technology based on Etherium and not about their token (LRC).

As main condition everyone would have to use the particular uncompromised platform. E.g. the loopring wallet app for iPhone or Android, again not talking about LRC as a token here. If on the opposite every broker kept its own platform and would pinky promise to connect to the Loopring backend, we could probably end up in the same situation as today. Brokers could internalize orders or route to only certain exchanges. So how to solve this? A) only allow "Loopring App" for holding and trading shares B) implement authenticity checks at B1) shareholder interactions, like voting B2) other purposes, like interacting with products of the company (e.g. the Twitter Account would connect with your wallet and show the amount of shares you own). So this as an example for the "ownership" part (see also the DD about ownership here (https://lemmy.whynotdrs.org/post/331878), for the exchange part solution A would solve the issue, B maybe. A graphical overview of those stages:

We will go on in this post mostly assuming the green path would take the majority of shares and orders (aka “free and fair market”).

How would shorting work in such a market?

Here is a thought experiment on how shorting could work in such a free and fair market. Let’s say realGME was the token of the company and wrappedGME the derivative which you get instead of realGME when lending your share.

Here is a thought experiment on how shorting could work in such a free and fair market. Let’s say realGME was the token of the company and wrappedGME the derivative which you get instead of realGME when lending your share.

1. If you buy a tokenized stock you would always know that realGME is the one which is a real share, always with 1:1 voting rights and 1:1 rights of 1/(shares outstanding) of the company, always.
2. A buyer would therefore only buy realGME, not some wrappedGME (this is very different today with e.g. EU brokers going to EU exchanges and only offering GS2C instead of GME).
3. A shortseller would then need to somehow get realGME which he needs to sell to a buyer, he could not sell wrappedGME. Yes, you could maybe fuck around with the derivative wrappedGME, but you could not with realGME - thus any buyer always gets a real share, the lender may be cheated, true. So the lender should know the risk when getting wrappedGME. Today lenders and buyers are cheated. Also the (short-term) negative price pressure on realGME would still be there. Keep this in mind for now.
4. The new buyer becomes owner of the realGME with its voting and economic rights on the company attached, no one can take the realGME from him by whichever force.
5. The old owner who gave his share away to shortsellers receiving a wrappedGME which only signals the ownership rights on a realGME, but losing his voting and economic rights - the old owner got a derivative, which is clear at the time.

So the ownership right is clear in every second of this transaction. This is fundamentally different than today. And now to make this system work we would need:

6. wrappedGME could be provided by a smart contract which holds collateral from the short seller (e.g. ETH or some kind of USD).
7. the short seller can either buy back a realGME and exchange it for wrappedGME or in case of a "margin call" the smart contract will automatically buy back realGME and do the exchange.

7b) for this to work the margin call would always be below the value of the collateral.

7c) still, in extreme situations when the price of realGME is higher than the value of the collateral a buy back is not possible. Then the old owner would lose the realGME and receive the collateral instead.

7d) we'd likely see a huge number of variants in how collateral is paid, upon which terms, etc.

In short: shorts would still pretty much work, maybe even better than today. But it forces more honesty between two people or entities making a deal.

Comparing todays short technics with those in a free and fair market

However, there are many more tactics to influence a stock price and we will dive into each and look whether the whitepaper provides a solution.

Or in short:

What is left for shorts and how can we be one or two steps ahead?

Man, such a free and fair market would be something I am really scared of if I had a lot of naked shorts in nearly every stock on the planet. This would indeed something, shorts never forget. Since its also a few years that individual investors theorized such a system for GME, there is no way shorts haven’t been doing this for some years now. And while there might be countermeasures from shorts in the political, regulatory, behavioral and so many different corners, we will just look at their usual techniques and see what’s left. So the three main things which work independently of a free and fair market are pumps & dumps, poops & scoops, short & distort. Let’s call them traps.

So if they cannot beat individual investors by their normal tactics they have to probably level up on what’s left. Ah, and make no mistake also institutional investors are being played. Don’t forget, this is a game of longs vs naked shorts.

Now, to be one step ahead, we should discuss exactly the matter of this post. We know about GME pretty well, but we can only direct register every share once, so probably the question in which stock to invest is a pretty important questions. Maybe also some might want to become activist investors themselves. Therefore, to be two steps ahead we should already begin to understand short traps (where a subset is surely “meme traps”). And I imagine this is game where we never finish learning. Let’s begin.

Sources https://www.reddit.com/r/Superstonk/comments/v20yqz/best_tldr_of_this_whole_saga_by_ujgatprime/ (I really recommend you to look through the comments of JG-at-Prime) https://web.archive.org/web/20210131131256/http://www.counterfeitingstock.com/CS2.0/CounterfeitingStock20Full.pdf https://loopring.org/resources/en_whitepaper.pdf

Inspired by u/Region-Formal.