Operational Efficiency - This Is Gonna Hurt
Howdy Apes,
TL;DR – Operational efficiency was designed for normal market conditions where buyers and sellers exist on CS, it wasn’t designed for only buyers to exist.
On Computershare’s page covering DRS, they describe operational efficiency as benefitting plan participants as well as Computershare
You can find this part quickly with Ctrl+F. The term “operational efficiency” is only used 3 times in the entire page, this is the first. I’ll pull in the 2nd/3rd later.
However, there’s been folks calling for an end to operational efficiency and equating it to CS handing over shares to DTC for fuckery to occur. This post is going to look at what CS would need this for, or rather why would these operational efficiency shares need to exist?
Check this too
A DD from yesterday morning titled “DRS, DSPP, and DRIP oh my!” in part dealt with DirectStock which is a combined plan of DRIP and DSPP. I’m pulling some stuff from that so I’d like to thank the author who is Fucked Up Beyond Any Recognition for compiling some of these sources. That post more closely examines DirectStock and you may want to read it too because I’m not diving in hard to that here. With DirectStock enabled, a user enters a principal-agency relationship with Computershare.
So who is the principal and who is the agent and what does that mean?
Investopedia - Principal Agent Relationship
- YOU the owner are the principal. It is your stock and you decide on buy, hodl, sell.
- CS is the agent (agency). Using an example from the link, You might own shares in an index fund (you are the principal) and the fund manager (agent) is adjusting their ownership of all of the shares that make up that fund. Back to CS, you own your shares and CS is making adjustments on the total of what they hold.
To recap where we are so far…
- Plan accounts have a principal agency relationship with CS
- Book accounts have a strict principal relationship to GME
- The principal agency relationship is what allows CS to control operational efficiency.
So why would this operational efficiency part ever be included? Well it’s important to remember that instead of playing video games inside all day, there’s a world to go outside and run around in.
Fuckin Do It
Yeah sometimes I forget other stocks exist too.
Nike also uses Computershare as a transfer agent and for a moment we are going to consider the idea of a Nike investor. I’m using Nike because it’s more or less following along with SPY, it’s a profitable company with a dividend, and it’s probably a good example of what Direct Registration was meant for (people who have a strong interest in the company and plan on hodling for a long time). The investor bought into Nike in the early 2000s. It’s gone up a ton since then and while they think it’ll climb more, they see more opportunity investing elsewhere. They have a Plan account and have been reinvesting with DRIP up until this point but for them it’s time to sell.
Yes yes, book and what not but this post is meant to focus on looking at what this idea of operational efficiency was included for, because it’s CS who says it has a beneficial purpose. Book accounts aren’t connected to this operational efficiency part so I’m not covering them.
Bringing back the CS page that covers DRS again, here’s the other 2 times operational efficiency is mentioned.
Focus on the orange highlight for this part
According to CS these operational efficiency (in orange) shares are designed to enable any sales to be settled efficiently. So the moment that the Nike investor is ready to sell, they already have some shares ready to complete this trade rather than needing to pull their specific shares, remove them as the registered owner, then put them up for sale. They can complete the sale as soon as the Nike investor wants (because maybe the investor reached a price target they wanted to hit before pulling the trigger) and deal with whose name is on the share after. That’d be the benefit for the plan participant.
Expand the Nike idea that outwards to realize there can be hundreds and even thousands of those Nike investors. Some are content hodling, some are nearing their price target, but in all likelihood they always have some buyers and some sellers. Some folks constantly reinvesting, some folks ready to move on. That’s why we are talking about Nike for this piece, a stock that isn’t just experiencing buy and hodl. It’s what this operational efficiency language would be designed for because it's what most people were doing. So that when those customers are ready to sell, CS can move on it faster.
Now to address the final time “operational efficiency” language is used.
Same photo, now looking at yellow
The 3rd time (in yellow) operational efficiency is used “…Computershare determines the portion (of the aggregate amount of plan shares) needed for operational efficiency reasons.” To drive this sentence home…
- It DOES NOT say all plan shares are held at DTC
- It DOES NOT give a specific number or percent that are held at DTC
- It ONLY says that Computershare determines the portion held at DTC
So what would help them determine the portion needed to hold at DTC for operational efficiency?
SALES. They flat out said what the operational efficiency shares are for. “To enable any sales to be settled efficiently”. They are talking about sales out of CS accounts, so that they immediately have shares they can deliver (the mythical world where delivery actually occurs). If they don’t have anyone selling shares of a particular stock, what’s the purpose of holding a large portion of those shares at DTC? Again to make it clear…
IF NO GME SHARES ARE BEING SOLD, WHY BOTHER HOLDING MANY AT DTC? THERE’S NO SALES TO SETTLE.
Now the reality of the situation is a seller could exist. There could be one rando whose been living under a rock who for some reason has been holding for 84 years at CS and has finally decided to sell so they can buy some Nike (yes I understand the sheer absurdity of this sentence but all I’m getting at is that it’s not impossible a seller exists). And because this seller could exist, CS would have reason to keep a portion of these plan shares at DTC for operational efficiency albeit there’s no reason to hold many there if there is no data to support many shares needed for operational efficiency.
And I’ll preemptively respond to what some folks will say…..“CS knows apes are hodling and there aren’t sellers why do they need to hold any at DTC just because of the possibility that the one seller exists?”.
Because it’s a business and that’s the protocol they follow for everything. I don’t doubt they understand how GME and apes are a different breed than what the business was designed for, but what do they do when that one seller comes along and wants the same efficiency they’d get on any other stock? They are going to treat that customer the exact same as every other customer and get them that efficiency. Some folks will be able to read that and recognize “Yep, that’s in line with how a business would function” and others will be upset about that. And if you hate this efficiency part now, oh lordy fuck you’ll hate this next part.
Above I laid out how a lack of selling would give CS reason to determine that the portion of shares they need to hold at DTC can be small. Inversely, an increase in selling would give them reason to increase the portion of shares they hold at DTC. They would have more sales they need to settle.
These next few paragraphs are speculative. Wouldn’t it be in shorts favor if there was a temporary surge in the number of shares held at DTC? Like if for example there was suddenly a push to sell fractionals? CS puts their orders in batches and combined this makes a bunch of full shares that would need that operational efficiency portion to be larger. What an incredible thing to hit Superstonk with over such an obscure little detail that would take days to weeks to dig into. What a great way to confuse apes. While apes debate over whether Book or Plan is the way, the real goal is just get that surge in shares held at DTC to happen by getting some fractionals sold.
And you know what hurts and is most painful? THEY FUCKING TRICKED ME INTO EATING THIS BAIT TOO!
Record screech, \"Yep, that's me. You are probably wondering how I ended up in this situation\"
A week ago in this post, I thought this debate was dumb as shit because who would care about 200k (AT MOST) shares and people buying fractionals were nuts anyway when whole shares are under $20. Digging into this operational efficiency issue it hits me, getting the fractionals to sell would be a reason for CS to start holding more of the Plan shares at DTC. My guess is that CS has a computer program tracking all of its stocks to follow how many sells it sees everyday and uses that to determine what portion of that stock needs to be held at DTC. If sells start ramping up, the computer plans to have more and more shares ready for operational efficiency. If (for example) sells start ramping up from 0 to collectively 1000 in a day the computer screams “HOLY FUCK, MOVE A FUCK LOAD FOR OPERATIONAL EFFICIENCY” because it’s never before had to understand that people were selling fractionals, it just interprets it as sell volume has rocketed dramatically. If sells slow down, it needs fewer and fewer shares at DTC. But as long as some folks buy into the fear tactic of “All your shares could be held a DTC” and some folks kept their autobuy on, the fractionals getting sold would be more reason for CS to hold more Plan shares at DTC. Apes would be arguing themselves into blowing the problem up bigger.
End Speculative Statements
Here are questions could be asked to get more clarity around the operational efficiency issue. They are broad enough to be valuable to shareholders of any stock. I don’t think your average customer service agent is equipped to explain these as they ask for details beyond what is on the DRS page.
1) To Computershare – What factors go into determining the portion of DSPP shares that get held at DTC?
This question is important in determining if sales are effecting how many shares are held at DTC. If it’s just a set % that gets held, you could move your shares to book and no surge would occur. If it’s based on how many sales they plan to handle, then not selling is what will reduce the amount held at DTC whether they are plan/book.
\If it is the latter, the people advocating selling the fractional would inadvertently be causing the amount held at DTC to increase.*
2) To Computershare – Are there any reasons besides “enabling any sales to be settled efficiently” that shares are held at DTC for operational efficiency?
If there are more reasons, they’d need to be known in order to address them. All we can establish at the moment is that there’s some amount at DTC to facilitate when selling occurs.
Final Note
I still think this shit is fucking stupid. Whether you want to admit it or not, there are loads of apes who are watching for when the price bottoms out in order to maximize the amount of shares they can get for their money and they buy whole shares because dickering over less than $20 to get a slice of something is silly. You call them bullshit artist tea leaf readers, they stop talking to you and enjoy the tastiest parts of the dip for themselves. There are apes who only ever buy whole shares at a broker, DRS transfer in, and boom they have stacks of book shares they never have to think about. Buying through CS, while convenient, means you are waving off the ability to find the best price possible that you want to buy at. Even if my speculation is right and your Plan account and autobuys are fine and being counted correctly I still can’t stand the lack of effort at finding the best deal possible. I agree, every share at this point is a steal but if you have $100 in your pocket and the option to buy 5 for $20 each or 4 for $25 each, it’s only a fool who thinks it’s somehow better to own less. This sub would never have to suffer through this nonsense if folks did their own research.
To all of you apes who like me who find a price you like and buy up whole shares at your broker and DRS transfer in, cheers. To everyone else the flair below my name shares my thoughts pretty concisely, exercise that downvote button all you’d like.
