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Breakdown of the SEC Legalese from a fellow lawyer ape who deals with SEC filings for a living (NOT FINANCIAL ADVICE, NOT LEGAL ADVICE)
=======================================================================================================================================
| Author | Source |
| :-------------: |:-------------:|
| [u/luridess](https://www.reddit.com/user/luridess/) | [Reddit](https://www.reddit.com/r/GME/comments/mc5jbj/breakdown_of_the_sec_legalese_from_a_fellow/) |
---
[DD](https://www.reddit.com/r/GME/search?q=flair_name%3A%22DD%22&restrict_sr=1)
[U/Luridess](https://iili.io/qwTNOx.jpg)
*NOT FINANCIAL OR LEGAL ADVICE. THIS IS JUST HOW I, AS A FELLOW APE WITH A LAW DEGREE FROM APE UNIVERSITY WHO ALSO READS SEC FILINGS FOR A LIVING, UNDERSTANDS THE INFORMATION IN GAMESTOP'S SEC FILING. THIS IS FOR INFORMATIONAL PURPOSES ONLY. IN SHORT, I LIKE THE STOCK. 💎👐 🚀🚀🚀
*EDITS:*
1. *edited chart for clarity. Blank boxes are intentional*
2. *Added info from fellow apes, added TLDR summary at the top*
3. *Some comments that the first letter of some sentences are missing. I can see the first letters on my laptop & my phone so don't know what's happening*
4. *Some of you are asking stonk questions &possible stonk conclusions. I can't answer those because I don't know much about the stock market.*
5. *Added to TLDR*
6. *added user comments & removed replicated risk factors in chart*
7. [u/The_Law_of_Pizza](https://www.reddit.com/u/The_Law_of_Pizza/) *thinks* *I'm a* [troll/shill and this is a fake account](https://www.reddit.com/r/GME/comments/mc5jbj/breakdown_of_the_sec_legalese_from_a_fellow/gs2e70o?utm_source=share&utm_medium=web2x&context=3) *because they don't agree with my wording & I left out "subsequent events".* [YES, it's true that certain events that happen post-fiscal year end must be reported, like a change in accounting principles or a discontinued operation](https://www.sec.gov/corpfin/cf-manual/topic-13)*. I didn't include that & other nuances in my post because it's NOT relevant to this SEC Filing. I asked* [u/The_Law_of_Pizza](https://www.reddit.com/u/The_Law_of_Pizza/), *who is apparently a Securities Lawyer, whether or not they can provide some definitive proof that reference to a post-financial year end short squeeze that may or may not happen is considered a "subsequent event" in accordance with SEC rules and regulations. If that is the case, then I will of course update/correct my post. But I personally haven't found any legal authority that says commenting on a potential short squeeze that hasn't happened yet, and may or may not happen, is a "subsequent event".*
8. *added user comments to chart*
9. *Updated TLDR summary on why GME overdisclosed*
10. 🦍s *I am legit overwhelmed by your support & love.* 🙏 *for the awards but save your* 🍌*for stonks. Y'all are making me emotional. Who's cutting onions in here? Stop it! I'll respond to all your comments now*,🙏
11. Added picture at the top
_______________
TLDR APE SUMMARY 🦍🦍🦍:
- SEC filings are legally binding documents and the information within can be used against companies in court proceedings.
- GME has no obligation to include any information about anything after their fiscal year, January 31, 2021, unless it's a ["subsequent event"](https://www.sec.gov/corpfin/cf-manual/topic-13). To my knowledge, unless someone proves me wrong, speculating on a potential squeeze that may or may not happen in the future does NOT fall under this category.
- GME confirmed that as of January 31, 2021, the stock was shorted over 100%
- GME included LEGALLY BINDING information post-January 31, 2021, specifically about its stock, price volatility, and the short squeeze.
- GME is basically saying that they are not responsible for any potential short squeezes that may or may not occur.
- GME IS NOT CONFIRMING that a short squeeze will happen, because no one can predict the future. They are just saying that it's a possibility.
- GME DIDN'T HAVE TO DO THIS.
- I'm almost 100% positive that their lawyers advised against including any post-fiscal information, because if I was GME's lawyer that is what I would have advised them in order to limit GME's potential liability, but the fact that it's included anyway, is KIND OF A BIG DEAL.
- Why did they do this? Who knows? But this ape thinks it's to let everyone know what is going on, and to let everyone know that THEY ARE ALSO AWARE of what is going on.
- UPDATE: I also like [u/bigbrainbets](https://www.reddit.com/u/bigbrainbets/)'s [theory](https://www.reddit.com/r/GME/comments/mc5jbj/breakdown_of_the_sec_legalese_from_a_fellow/gs342si?utm_source=share&utm_medium=web2x&context=3) because it expands on my initial theory of why GME wants us to know that they know what's going on. Apes strong together!
- THIS IS NOT FINANCIAL ADVICE OR LEGAL ADVICE OR MEDICAL ADVICE. JUST MY OWN APE INTERPRETATION. DO WITH IT WHAT YOU WILL.
- I like the stock and I will HODL.
_______________
Good morning my fellow Apes 🦍🦍🦍
I'm seeing a lot of different posts about interpretations and posts about the Gamestop SEC filing and what it means. I'm pretty excited to submit my first DD and contribute to this sub in a meaningful way, because while I'm only a smooth-brained ape when it comes to the stock market, I have a few wrinkles when it comes to SEC Filings.
What is an SEC Filing?
Publicly traded companies are required by the law to disclose relevant information concerning their business and corporate structure. The information enables investors to understand the company's business model and helps them to predict the company's future performance.
The following are the most common types of SEC filings:
1. SEC Filings Form 10-K (THIS IS THE ONE WE ARE INTERESTED IN TODAY)
2. SEC Filings Form 10-Q
3. SEC Filings Form 8-K
4. SEC Filings Form S-1
5. Form S-4
6. SEC Filings Form 11-K
Form [10-K](https://corporatefinanceinstitute.com/resources/data/public-filings/sec-10-k/) is a report that gives a comprehensive analysis of the company. It includes a detailed summary of the company's results, [management discussions](https://corporatefinanceinstitute.com/resources/data/public-filings/mda-management-discussion-analysis/), and audited financial statements. Companies are required to submit this filing within 90 days after the end of their fiscal year.
*APE INTERPRETATION* 🦍🦍🦍:
- *Companies with stonks need to make their financial info public, so that apes with bananas can decide for themselves if they want to keep or sell their bananas. Financial information includes things like profit, loss, any potential lawsuits, and risks to the company.*
- *Companies file 10-k reports at the end of each financial year. These reports describe the activities of the last financial year,* *NOT ACTIVITIES UP TO AND INCLUDING THE DAY OF FILING (THIS IS IMPORTANT)*
- *These reports are professionally audited and reviewed/filed by lawyers, because any incorrect or misleading information can lead to huge lawsuits.*
- *INFORMATION IN AN SEC FILING IS THE MOST ACCURATE SOURCE OF INFORMATION YOU CAN FIND ON ANY COMPANY (unless that company is lying, which would be financial/business suicide).*
*Source:* [*https://corporatefinanceinstitute.com/resources/data/public-filings/types-of-sec-filings/*](https://corporatefinanceinstitute.com/resources/data/public-filings/types-of-sec-filings/)
GAMESTOP SEC FILINGS FORM 10-K - OUTSTANDING SHARES:
*(Source:* [*2021 SEC Filing*](https://sec.report/Document/0001326380-21-000032/)*)*
> ☒ The aggregate market value of the voting and non-voting common stock held by non-affiliates of the registrant as of July 31, 2020 was approximately $244.4 million, based upon the closing market price of $4.01 per share of Class A Common Stock on the New York Stock Exchange. (For purposes of this calculation all of the registrant's directors and officers are deemed affiliates of the registrant.)
>
> Number of shares of $.001 par value Class A Common Stock outstanding as of March 17, 2021: 69,935,828
The number of shares outstanding represents the amount of stock on the open market, including shares held by [institutional investors](https://www.investopedia.com/terms/i/institutionalinvestor.asp) and [restricted shares](https://www.investopedia.com/terms/r/restrictedstock.asp) held by insiders and company officers.
*(Source:* [*https://www.investopedia.com/terms/o/outstandingshares.asp*](https://www.investopedia.com/terms/o/outstandingshares.asp)*)*
*APE INTERPRETATION* 🦍🦍🦍:
- *As of March 17, 2021, Gamestop has 69,935,828 Bananas*
GAMESTOP SEC FILINGS FORM 10-K - INFORMATION IS ONLY FOR A CERTAIN PERIOD OF TIME:
*(Source:* [*2021 SEC Filing*](https://sec.report/Document/0001326380-21-000032/)*)*
Everyone is excited about the Gamestop SEC Filing, and I'm seeing a lot of posts that, among other things, this CONFIRMS the percentage of shorts and other things.
THIS MAY OR MAY NOT BE ACCURATE, AND HERE IS WHY:
If you look at the TOP of the SEC filing, it clearly says
> ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
>
> For the fiscal year ended January 30, 2021
*APE INTERPRETATION* 🦍🦍🦍:
- *THE FINANCIAL INFORMATION IN THE SEC REPORT ONLY APPLIES TO THE TIME PERIOD OF FEBRUARY 1, 2020 TO JANUARY 31, 2021*
- *COMPANIES ARE NOT OBLIGATED TO REPORT ON ANYTHING AFTER THEIR YEAR END*
- *THE FACT THAT GAMESTOP TALKS ABOUT EVENTS AND SITUATIONS AFTER THEIR YEAR END, UP TO THE DATE OF FILING, IS KIND OF A PRETTY BIG DEAL BECAUSE EVERYTHING THEY FILE WITH THE SEC HAS TO BE ACCURATE AND IT'S A BINDING LEGAL DOCUMENT THAT COULD POTENTIALLY BE USED AGAINST THEM IN COURT.*
GAMESTOP SEC FILINGS FORM 10-K: A SIDE-BY-SIDE COMPARISON OF 2020 & 2021
*(APE INTERPRETATION 🦍🦍🦍: how do you read these things and what can you look for?)*
| | [2020 10-k](https://sec.report/Document/0001326380-20-000022/#s576B62BC1E8858169F83C7199E784BE1) | [2021 10-k](https://sec.report/Document/0001326380-21-000032/) | *MY PERSONAL APE INTERPRETATION* *🦍:* |
| --- | --- | --- | --- |
| Item 1A - Risk Factors disclaimer paragraph | An investment in our company involves a high degree of risk. You should carefully consider the risks below, together with the other information contained in this report, before you make an investment decision with respect to our company. The risks described below are not the only ones facing us. Additional risks not presently known to us, or that we consider immaterial, may also impair our business operations. Any of the following risks could materially adversely affect our business, operating results or financial condition, and could cause a decline in the trading price of our common stock and the value of your investment. | RISK FACTORS An investment in our company involves a high degree of risk. You should carefully consider the risks below, together with the other information contained in this report, before you make an investment decision with respect to our company. The risks described below are not the only ones facing us. Additional risks not presently known to us, or that we consider immaterial, may also impair our business operations. Any of the following risks could materially adversely affect our business, operating results or financial condition, and could cause a decline in the trading price of our Class A Common Stock and the value of your investment. | *My lawyer eyes caught this difference in terminology (see bold). I don't know if this is significant or not because I'm not familiar with stonks, but my lawyer eyes caught this difference, and as a lawyer my ape brain thinks "Why difference? Is there a reason behind this?" I would appreciate it if an ape with more wrinkles than me could explain whether or not this is significant or not.* *EDIT:* [greysweatseveryday](https://www.reddit.com/user/greysweatseveryday/)'s input: I do not think the change to using the proper term for their common stock (Class A Common Stock) vs. the normal common stock is a meaningful change. Probably an associate doing a find and replace for any references to common stock, as it is better practice to refer specifically to the formal legal name for the stock that is issued and outstanding. |
| Itemized list of Risk factors TITLE COMPARISON: | Risks Related to Our Business | Risks Related to Our Ability to Grow Our Business | *Why the difference? MY PERSONAL OPINION AND INTERPRETATION IS THAT I think in 2020 the risks were about whether the business will go bankrupt or not, whereas in 2021 the risks relate to how MUCH they can grow the business. THIS IS A HUGE DIFFERENCE!!!* |
| | Risks Relating to Indebtedness | NA | *NO INDEBTEDNESS RISKS IN 2020!* |
| | NA | Risks related to our Retail Operations | *I think they added more titles to easily break down the risks and make it very clear and easy to follow along.* |
| | NA | Risks related to Laws and Regulations | *I think they added more titles to easily break down the risks and make it very clear and easy to follow along.* |
| | NA | Risks Related to Our Common Stock | *THIS WASN'T IN THE 2019 FILING!* |
| | NA | Risks related to Financial Performance or General Economic Conditions | *I think they added more titles to easily break down the risks and make it very clear and easy to follow along.* |
| Itemized list of BUSINESS RETAIL LAWS & REGULATIONS risk factors: | NA | NA | NA |
| | NA | Macroeconomic pressures in the markets in which we operate, including, but not limited to, the effects of the COVID-19 pandemic may adversely affect consumer spending and our financial results. The impact of the COVID-19 pandemic has had, and is expected to continue to have, an adverse effect on our business and our financial results. | *This was a risk in 2021, but not in 2020* |
| | Economic conditions in the U.S. and in certain international markets could adversely affect demand for the products we sell. | Economic, social and political conditions or civil unrest in the U.S. and in certain international markets could adversely affect demand for the products we sell and the ability of our stores to remain open. | *Same (pretty much)* |
| | The video game industry has historically been cyclical and is affected by the introduction of next-generation consoles, which could negatively impact the demand for existing products or our pre-owned business. | *same* | |
| | We depend upon the timely delivery of new and innovative products from our vendors. | *Same* | |
| | Technological advances in the delivery and types of video games and PC entertainment hardware and software, as well as changes in consumer behavior related to these new technologies, have and may continue to lower our sales. | *Same* | |
| | If we fail to keep pace with changing industry technology and consumer preferences, we will be at a competitive disadvantage. | *Same* | |
| | International events could delay or prevent the delivery of products to our suppliers | *Same* | |
| | Our ability to obtain favorable terms from our suppliers may impact our financial results. | Our ability to obtain favorable terms from our suppliers and service providers may impact our financial results. | *Same (pretty much)* |
| | NA | We depend on third-party delivery services to deliver products to our retail locations, processing centers and customers on a timely and consistent basis, and deterioration in our relationship with these third-party providers or increases in the fees that they charge could reduce our margins, harm our reputation and adversely affect our business and financial condition. | *This was a risk in 2021, but not in 2020* |
| | Our international operations expose us to numerous risks. | *Same* | |
| | An adverse trend in sales during the holiday selling season could impact our financial results. | *Same* | |
| | An important element of our business strategy is to de-densify our global store base. Failure to successfully transfer customers and sales from closed stores to nearby stores could adversely impact our financial results. | An important element of our business strategy is to de-densify our global store base. Failure to successfully transfer customers and sales from closed stores to nearby stores or our e-commerce channels could adversely impact our financial results. | *Same (pretty much)* |
| | If we are unable to renew or enter into new leases on favorable terms, our revenue may be adversely affected | *Same* | |
| | Pressure from our competitors may force us to reduce our prices or increase spending, which could decrease our profitability. | *Same* | |
| | Changes to tariff and import/export regulations may negatively impact our future financial condition and results of operations. | *Same* | |
| | Failure to attract and retain executive officers and other key personnel could materially adversely affect our financial performance. | Our strategic plans and transformation initiatives may initially result in a negative impact on our financial results and such plans and initiatives may not achieve the desired results within the anticipated time frame or at all. | *Gamestop filed 3 8-k filings yesterday relating to changes in their board of directors.* |
| | If our management information systems fail to perform or are inadequate, our ability to manage our business could be disrupted. | *Same* | |
| | We rely on centralized facilities for refurbishment of our pre-owned products. Any disruption to these facilities could adversely affect our profitability. | *Same* | |
| | NA | Disruptions to our logistics capability or supply chain may have an adverse impact on our operations. | *This was a risk in 2021, but not in 2020* |
| | Our sales of collectibles depend on popularity of and trends in pop culture, and our ability to react to them. | *Same* | |
| | We depend on licensed products for a substantial portion of our sales of collectibles and our inability to maintain such licenses and obtain new licensed products would adversely affect our sales of collectibles. | *Same* | |
| | If we do not maintain the security of our customer, employee or company information, we could damage our reputation, incur substantial additional costs and become subject to litigation | *Same* | |
| | Damage to our reputation could adversely affect our business and our relationships with our customers. | If we are unable to successfully maintain strong retail and e-commerce experiences for our customers, our sales and results of operations could adversely be impacted. | *wording difference... anyone have a good idea why?* EDIT: [menodialogues](https://www.reddit.com/user/menodialogues/) says they're an ape CEO and commented: the wording is different because they have a new strategic focus. before they were actually worried about the GME brand fading away and being forgotten, but given the attention, this isn't an internal or external threat anymore, so now it's about executing on the brand recognition and not missing opportunities to sell. |
| | If our internal control over financial reporting is ineffective, our business may be adversely affected and we may lose market confidence in our reported financial information which could adversely impact our business and stock price. EDIT: [ReverseTickleMonster](https://www.reddit.com/user/ReverseTickleMonster/)[28 minutes ago](https://www.reddit.com/r/GME/comments/mc5jbj/breakdown_of_the_sec_legalese_from_a_fellow/gs26vh2/?utm_source=reddit&utm_medium=web2x&context=3)'s input: Am Ape, not advisor. Ape guesses that: Internal control refers to, among other things, their method of applying GAAP accounting principles to their Financial statements. Revenue recognition changed with the new 606 rules and how some is recognized (subscriptions, etc.). These differences can positively or negatively affect the company's financial outlook. If an external auditor found that some revenue or expenses were mis-categorized or used the old 605 rules as opposed to 606, this could materially ( *🦍* speak: largely) affect their financial statements. *🦍* Speak: Accounting rule changes could affect their reported numbers for the better or worse. | The manner in which we fund tax withholding obligations that will arise upon vesting of outstanding restricted stock awards may require us to use a substantial amount of cash, which would reduce our liquidity, or may result in sales of shares of our Class A Common Stock into the market, which could cause the market price of our Class A Common Stock to decline. EDIT: [ReverseTickleMonster](https://www.reddit.com/user/ReverseTickleMonster/)[28 minutes ago](https://www.reddit.com/r/GME/comments/mc5jbj/breakdown_of_the_sec_legalese_from_a_fellow/gs26vh2/?utm_source=reddit&utm_medium=web2x&context=3)'s input: Am Ape, not advisor. Ape guesses that: Because the 2019 rule is no longer referenced, I assume that they switched to 606 rules and this is no longer a concern. Now in 2020 They are concerned with setting aside an appropriate amount of cash to pay for taxes on vested restricted stock awards. The company can pay these taxes, or pass the tax bill to the individual if they so choose (unlikely). This is where we would look at available options for inside holders as well as institutional warrants. IF any are exercised that should create a taxable event. i believe that this is saying: *in the event that they have more restricted options/warrants exercised than budgeted, they may have to sell stock into the market to foot the bill*. However, exercising these options/warrants converts them into restricted stock, which wouldn't trade on the open market; this would lock these up for trading. Also keep in mind that they clearly state that they have SOME funds to cover taxes for this event already, which would more than likely cover the tax expense based on their prediction. *🦍* Speak: They are covering their base in case restricted stocks are exercised by insiders. This is not saying that they WILL sell shares to cover the tax obligations. It's saying 'Worst case scenario if we need more money for taxes, we CAN sell more stock to cover additional tax expenses. | *Can an ape with more wrinkles explain this difference?* |
| | If our vendors fail to provide marketing and merchandising support at historical levels, our sales and earnings could be negatively impacted. | *Same* | |
| | Restrictions on our ability to purchase and sell pre-owned video game products could negatively affect our financial condition and results of operations. | *Same* | |
| | Sales of video games containing graphic violence may decrease as a result of actual violent events or other reasons, and our financial results may be adversely affected as a result. | *Same* | |
| | Unfavorable changes in our global tax rate could have a negative impact on our business, results of operations and cash flows | *Same* | |
| | Litigation and the outcomes of such litigation could negatively impact our future financial condition and results of operations | *Same* | |
| | Our Board of Directors elected to eliminate the Company's quarterly dividend, which became effective during the second quarter of fiscal 2019. We have no current plans to pay cash dividends on our common stock in the foreseeable future. | NA | *This was a risk in 2020, but not in 2021 - See above note regarding the 8-k forms filed the same day as the 10-k* |
| ITEMIZED LIST OF CREDIT RISKS | NA | NA | NA |
| | The terms of our 6.75% senior notes due in March 2021 and revolving credit facility may impose significant operating and financial restrictions on us. | | |
| | Because of our floating rate credit facility, we may be adversely affected by interest rate changes. | | |
| | To service our indebtedness, we will require a significant amount of cash. We may not be able to generate sufficient cash flow to meet our debt service obligations or refinance our debt on favorable terms. | | |
| | Despite current indebtedness levels, we and our subsidiaries may still be able to incur additional debt. This could further increase the risks associated with our leverage. | | |
| Itemized LIST OF STOCK RISKS | | | |
| | NA | The market price of our Class A Common Stock has been extremely volatile and may continue to be volatile due to numerous circumstances beyond our control. | |
| | NA | A "short squeeze" due to a sudden increase in demand for shares of our Class A Common Stock that largely exceeds supply has led to, and may continue to lead to, extreme price volatility in shares of our Class A Common Stock. | |
| | NA | Information available in public media that is published by third parties, including blogs, articles, message boards and social and other media may include statements not attributable to the Company and may not be reliable or accurate. | |
| | NA | Future sales of a substantial amount of our Class A Common Stock in the public markets by our insiders, or the perception that these sales may occur, may cause the market price of our Class A Common Stock to decline. | |
GAMESTOP SEC FILING: RISKS RELATED TO OUR COMMON STOCK
The market price of our common stock has fluctuated, and may continue to fluctuate, widely, due to many factors, some of which may be beyond our control. These factors include, without limitation:
*(APE INTERPRETATION* 🦍🦍🦍: *the factors in this list are NOT EXHAUSTIVE. the "without limitation" DOES NOT MEAN THAT THE VALUE OF THE SQUEEZE IS WITHOUT LIMITATION. They even put a COLON after the words "without limitation" which in grammatical terms, indicates the beginning of a list, and therefore it's A FULL STOP, like a period.)*
- "short squeezes";
(*APE INTERPRETATION* *🦍🦍🦍: NOTICE HOW SHORT SQUEEZE IS IN QUOTATIONS? That means they are using a specific definition for it, and their interpretation of what a short squeeze means should be in the document itself. the interpretation is further below)*
- comments by securities analysts or other third parties, including blogs, articles, message boards and social and other media;
(*APE INTERPRETATION* *🦍🦍🦍: SHOUTOUT TO* [r/GME](https://www.reddit.com/r/GME/) *AND APES!!)*
- large stockholders exiting their position in our Class A Common Stock or an increase or decrease in the short interest in our Class A Common Stock;
- actual or anticipated fluctuations in our financial and operating results;
- risks and uncertainties associated with the ongoing COVID-19 pandemic;
- the timing and allocations of new product releases including new console launches;
- the timing of new store openings or closings;
- shifts in the timing or content of certain promotions or service offerings;
- the effect of changes in tax rates in the jurisdictions in which we operate;
- acquisition costs and the integration of companies we acquire or invest in;
- the mix of earnings in the countries in which we operate;
- the costs associated with the exit of unprofitable markets, businesses or stores;
- changes in foreign currency exchange rates;
- negative public perception of us, our competitors, or industry; and
- overall general market fluctuations
For example, on January 28, 2021, our Class A Common Stock experienced an intra-day trading high of $483.00 per share and a low of $112.25 per share. In addition, from January 11, 2021 to March 17, 2021, the closing price of our Class A Common Stock on the NYSE ranged from as low as $19.94 to as high as $347.51 and daily trading volume ranged from approximately 7,060,000 to 197,200,000 shares. During this time, we have not experienced any material changes in our financial condition or results of operations that would explain such price volatility or trading volume.
(*APE INTERPRETATION* *🦍🦍🦍: THEY ARE BASICALLY SIGNALLING TO US THAT THE PRICE VOLATILITY HAS NOTHING TO DO WITH THE COMPANY ITSELF, THE COMPANY HAS REMAINED THE SAME, AND THIS IS BEING CAUSED BY OUTSIDE INFLUENCE - THEY HAD NO REASON TO DO THIS. THEY HAD NO REASON TO INCLUDE INFORMATION FROM JUST A FEW DAYS AGO IN THIS FILING, BUT THEY DID...)*
These broad market fluctuations may adversely affect the trading price of our Class A Common Stock. In particular, a large proportion of our Class A Common Stock has been and may continue to be traded by short sellers which has put and may continue to put pressure on the supply and demand for our Class A Common Stock, further influencing volatility in its market price. Additionally, these and other external factors have caused and may continue to cause the market price and demand for our Class A Common Stock to fluctuate substantially, which may limit or prevent our stockholders from readily selling their shares of our common stock and may otherwise negatively affect the liquidity of our Class A Common Stock.
GAMESTOP SEC FILINGS FORM 10-K: A "short squeeze" due to a sudden increase in demand for shares of our Class A Common Stock that largely exceeds supply has led to, and may continue to lead to, extreme price volatility in shares of our Class A Common Stock.
Investors may purchase shares of our Class A Common Stock to hedge existing exposure or to speculate on the price of our Class A Common Stock. Speculation on the price of our Class A Common Stock may involve long and short exposures. To the extent aggregate short exposure exceeds the number of shares of our Class A Common Stock available for purchase on the open market, investors with short exposure may have to pay a premium to repurchase shares of our Class A Common Stock for delivery to lenders of our Class A Common Stock. Those repurchases may in turn, dramatically increase the price of shares of our Class A Common Stock until additional shares of our Class A Common Stock are available for trading or borrowing.
This is often referred to as a "short squeeze."
(*APE INTERPRETATION* *🦍🦍🦍: THE LAST TWO SENTENCES IN THAT PARAGRAPH IS THEIR INTERPRETATION OF A SHORT SQUEEZE - notice the words "MAY", which means it CAN happen but it's not GUARANTEED, as opposed to using, for example, "SHALL" or "MUST")*
I hope this gives you a better understanding of how to read SEC documents, their significance, and things to look out for.

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Breakdown of Gamestop's SEC 10-K from Legalese to Ape Speak from an Ape Lawyer - PART 2: What is a "Forward-looking statement"; when forward-looking statements must be disclosed; did Gamestop have to include a potential "short squeeze" in their 10-K; & what this means (NOT FINANCIAL/LEGAL ADVICE)
=========================================================================================================================================================================================================================================================================================================
| Author | Source |
| :-------------: |:-------------:|
| [u/luridess](https://www.reddit.com/user/luridess/) | [Reddit](https://www.reddit.com/r/GME/comments/mdzuuf/breakdown_of_gamestops_sec_10k_from_legalese_to/) |
---
[DD](https://www.reddit.com/r/GME/search?q=flair_name%3A%22DD%22&restrict_sr=1)
[luridess on her way to 🦍,🦍&🍌 LLP](https://iili.io/qwTNOx.jpg)
MY MAIN THEORY (still evolving but I'm starting to become even more convinced that this is the reason):
What we know:
- GME confirmed that as of January 31, 2021, the stock was shorted over 100%
- GME's 10-K referenced that a short squeeze MAY happen based on events up to and including March 17, 2021
- GOD-TIER DD: [Shorts haven't covered yet](https://www.reddit.com/r/GME/comments/mc3tyi/did_the_shorts_cover_lets_investigate_with_some/)
My conclusion based on the information above:
- If you read between the lines, GME CONFIRMED on March 23, 2021 that a short squeeze HASN'T HAPPENED YET
- CONFIRMATION BIAS CONFIRMED! [u/greysweatseveryday](https://www.reddit.com/u/greysweatseveryday/) (a securities lawyer ape) agrees with my reading between the lines conclusion. [Comment can be found here](https://www.reddit.com/r/GME/comments/mdzuuf/breakdown_of_gamestops_sec_10k_from_legalese_to/gsdlfi1?context=3) thank you fellow lawyer ape! 🙏
- I don't know why they'd do this because it doesn't seem like it's necessary to do so, and there are many possible theories for this (see below)
- My own personal theory for why they'd do this: to cause a catalyst by third parties so 🍌🚀🌕, while covering themselves in case anyone accuses them of price manipulation, and also basically saying that anyone who says the squeeze happened is incorrect.
- Everyone's comments and the conversations I've had since posting has actually helped me to better formulate my theory (which is still evolving as I learn/discuss more). Thank you for your input!
*Edits:*
1. *added a picture at the beginning*
2. *updated my theory in the TLDR section & put it at the top of this post*
3. *updated my theory with some facts*
4. *updated my theory with God-Tier DD links from pinned mod post*
5. *confirmation bias confirmed in main theory thanks to *[u/greysweatseveryday](https://www.reddit.com/u/greysweatseveryday/)
*NOTE: I posted a* [*Part 2*](https://www.reddit.com/r/GME/comments/mduwke/breakdown_of_sec_legalese_to_speak_part_2) *earlier, but I was too ambitious in that post and realized half-way through that I couldn't get to all the topics and I should break it down even further, so please disregard that post. This is my REAL PART 2.* [*Once again thank you so much for all the appreciation you showed for my first DD that I posted a few days ago.*](https://www.reddit.com/r/GME/comments/mc5jbj/breakdown_of_the_sec_legalese_from_a_fellow/) *You've inspired me to continue translating SEC Legalese to 🦍 Speak and I'm happy to contribute some legalese DD to this sub as my way of giving back to this amazing 🦍community. 🦍 strong together!*
FULL DISCLOSURE:
- *This is not financial advice, this is not legal advice.*
- *I am NOT a securities lawyer.* *I do not prepare and file SEC forms.*
- *I am a customs/duties/tariffs litigator**, dealing with international* [*WTO hearings*](https://www.wto.org/english/tratop_e/dispu_e/dispu_status_e.htm) *and hearings similar to those at the* [*USITC*](https://www.usitc.gov/)*.*
- *SEC filings are a very important part of my practice because auditing and cross-examining a company's financials, including their SEC filings, is a key part in determining whether or not there has been injury caused by dumped/subsidized goods.*
- *My job is to read/review SEC forms, litigate them, find the loopholes, find the errors, find the language/terminology that can either support or not support a potential claim, and that includes cross-examining those who are responsible for them (CEO, CFO, COO, etc, depending on the case and who is available etc).*
- *This is also a learning exercise for me. The reason that I started looking this stuff up was because I was personally fascinated with what was going on, and I wanted to learn more. I decided to share what I've found out, and my personal thoughts, with everyone. I am on a learning journey and just taking you along for the ride. If I find something later in my research that is different than what I've said here, I will of course update this and provide explanations.*
- *If you are a securities lawyer or have any additional information that can help clarify/correct/elaborate on this post, please comment below and I will add the edits.*
The purpose of this post is to explain:
- How to read SEC 10-k filings;
- As a general rule, reading 10-K sec filings is a good way to learn about a company's fundamentals.
- My personal interpretation of Gamestop's SEC 10-K legalese;
- Why I think Gamestop didn't have to refer to "Short squeeze" in their 2021 filing and how I came to that conclusion
- Possible theories as to why they included a reference to a potential "short squeeze"
- Which sections are legally binding, and which sections are NOT legally binding included reference to a possible "short-squeeze"
__________________________
TLDR & 🦍Summary:
- GME's 10-K referenced that a short squeeze MAY happen based on events up to and including March 17, 2021 and that as of January 31, 2021 their stocks were shorted over 100%
- If you read between the lines, GME CONFIRMED on March 23, 2021 that a short squeeze HASN'T HAPPENED YET
- My own personal theory for why they'd do this: 🚀🌕
- I show you where to find the definition of "forward-looking statement" (the first sentence of their "Disclosure Regarding Forward-Looking Statements" paragraph)
- I show you how to read the definition of "forward-looking statement"
- I need the help of apes with more wrinkles to translate the definition into 🦍 Speak because I'm not a financial advisor
- I show you why using "AND" vs "OR" in a list is very important because that has an impact on the definition
- 🦍Example of AND vs OR:
- If GME 🚀🚀🚀 AND I make 1 million 🍌🍌🍌, I will quit my job (meaning, both things have to happen for me to quit my job).
- If GME 🚀🚀🚀 OR I make 1 million 🍌🍌🍌, I will quit my job (meaning, if only ONE of those things happen, I will quit my job)
- I conclude that the definition of "forward-looking statement" is limited to what's written in the laws only
- Companies can't be sued for forward-looking statements, UNLESS they were deliberately misleading or left out VERY IMPORTANT INFORMATION
- Companies are not obligated to update their forward-looking statements if the situation changes (aka read/use at your own risk)
- I still believe that:
- Gamestop did not have to include a reference to a short squeeze that may or may not happen;
- Gamestop included that reference for a reason.
- What is that reason? Your guess is as good as mine!
- Possible theories at the end (I'll update that list later tonight)
- One theory is that Gamestop included reference to a short squeeze to limit their own liability. While this is a possible theory, this doesn't seem to match up with the definition of "forward looking statement", especially the way that Gamestop defines short-squeeze in their 10-K. But I will dive deeper into this particular topic in a different post.
- EDIT: GME 💎💅 🚀🚀🚀🚀🌕
_______________________
🦍class is in session! Welcome to Part 2 of SEC Legalese to 🦍Speak. Today's class will explain to you:
- how to read/interpret SEC disclaimers
- the importance of grammar and punctuation when defining terms and understanding what a sentence means
- Side note:
- Grammar is actually incredibly important in legal documents.
- Major court hearings have turned upon the placement and subsequent definition of a comma.
- One of the most important law courses I took at Ape University was grammar.
- Now of course I won't be writing in legalese in this Reddit post so my grammar will not be up to the same standard as if I was writing a brief, just in case anyone is going to comment that I'm a shill/stupid because of some grammatical error or typo.
- Remember, I'm interpreting this into 🦍Speak so I'm using colloquial English.
- I will be using Gamestop's 10-k SEC filing from 2021 for informational purposes only, to provide examples.
Grammar lesson: "AND" vs "OR"
Seems pretty self-explanatory, but when reading legislation, this is actually very important because if a document has the word "AND" it means that all conditions have to be met for it to be applicable.
If a document has the words "OR" it means only ONE of the conditions needs to be met for it to be applicable.
🦍🦍🦍Example:
1. If GME 🚀🚀🚀 AND I make 1 million 🍌🍌🍌, I will quit my job (meaning, both things have to happen for me to quit my job).
2. If GME 🚀🚀🚀 OR I make 1 million 🍌🍌🍌, I will quit my job (meaning, if only ONE of those things happen, I will quit my job)
Simple enough, right? Keep this example in mind when we break down the legalese because this distinction is important!
Gamestop's SEC 10-K Disclosure Regarding Forward-Looking Statements:
Here is the paragraph in its entirety:
> [Disclosure Regarding Forward-looking Statements](https://news.gamestop.com/static-files/55a92a3e-144e-4d2b-8ee6-930db9045593)This Annual Report on Form 10-K ("Form 10-K") contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). In some cases, forward-looking statements can be identified by the use of terms such as "anticipates," "believes," "continues," "could," "estimates," "expects," "intends," "may," "plans," "potential," "predicts," "pro forma," "seeks," "should," "will" or similar expressions. These statements are only predictions based on current expectations and assumptions and involve known and unknown risks, uncertainties and other factors that may cause our or our industry's actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements. All forward-looking statements included in this Form 10-K are based upon information available to us as of the filing date of this Form 10-K, and we undertake no obligation to update or revise any of these forward-looking statements for any reason, whether as a result of new information, future events or otherwise after the date of this Form 10-K, except as required by law. You should not place undue reliance on these forwardlooking statements. The forward-looking statements involve a number of risks and uncertainties. Although we believe that the expectations reflected in our forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. A number of factors could cause our actual results, performance, achievements or industry results to be materially different from any future results, performance or achievements expressed or implied by these forward-looking statements. Factors that might cause such differences include, but are not limited to, those discussed in Part I, Item 1A of this Form 10-K under the heading "Risk Factors," which are incorporated herein by reference. You should carefully consider the risks and uncertainties described in this Form 10-K.
Whooooo! That is a long block of text with lots of big words and numbers and squigglies and run on sentences and commas and quotations and yea, before I went to APE UNIVERSITY I would have totally zoned out. But don't worry class!
I'm here to break this down for you piece by piece so that we can all understand what is going on!
Today's class will focus on the FIRST SENTENCE only, which I've bolded above, but here it is again:
Sentence 1:
> This Annual Report on Form 10-K ("Form 10-K") contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act").
Let's break this down piece by piece:
> This Annual Report on Form 10-K ("Form 10-K")
- pretty self-explanatory. It's referring to the words in the document that submitted, and does not refer to any other document.
> contains forward-looking statements
- Huh?
- What does this mean?
- Where can I find the definition of a forward-looking statement?
> within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act").
- Booyah! Here we go!
- I can find the definition of "forward-looking statement" here:
- [In Section 27A of the Securities act of 1933](https://www.govinfo.gov/content/pkg/COMPS-1884/pdf/COMPS-1884.pdf) (starts at the top of page 60 of the .pdf document);
- AND (THIS IS IMPORTANT)
- [Section 21E of the Securities Exchange Act of 1934](https://www.nyse.com/publicdocs/nyse/regulation/nyse/sea34.pdf) (starts at page 330 of the .pdf document)
POP QUIZ TIME! Why is the word "AND" important in that sentence?
ANSWER: Because Gamestop is basically telling us that their definition of "forward-looking statement" is a combination of BOTH of those laws, not one or the other.
[SECTION 27A OF THE SECURITIES ACT OF 1933](https://www.govinfo.gov/content/pkg/COMPS-1884/pdf/COMPS-1884.pdf)
Ok so what does Section 27A tell us? It's very long, so to save character space I screenshotted the section and added it here as images:
[SEC 27A 1/4](https://preview.redd.it/949db1jsvfp61.jpg?width=565&format=pjpg&auto=webp&s=089812804c4d5730f1fb8cb704e950731f365e2d)
[SEC 27A 2/4](https://preview.redd.it/omoeb0cuvfp61.jpg?width=549&format=pjpg&auto=webp&s=9e3de4068473a110d05b5935cabe45ed5353cc87)
[SEC 27A 3/4](https://preview.redd.it/3nrtwccwvfp61.jpg?width=576&format=pjpg&auto=webp&s=4e554c79d97363dfdfa991674203d8326393a6c8)
[SEC 27A 4/4](https://preview.redd.it/6vat9ctxvfp61.jpg?width=514&format=pjpg&auto=webp&s=e9eb647bc22848be0159f0efc691c1c9d4b43669)
WHOA. MORE LONG TEXT. At some point if you want to read through it you can**.**
Let's jump ahead to the definition first, and then we'll come back to look at the other sections.
The important part of Section 27A - Section I: DEFINITIONS
> (1) FORWARD-LOOKING STATEMENT: The term ''forward looking statement'' means
>
> (A) a statement containing a projection of revenues, income (including income loss), earnings (including earnings loss) per share, capital expenditures, dividends, capital structure, or other financial items;
>
> (B) a statement of the plans and objectives of management for future operations, including plans or objectives relating to the products or services of the issuer;
>
> (C) a statement of future economic performance, including any such statement contained in a discussion and analysis of financial condition by the management or in the results of operations included pursuant to the rules and regulations of the Commission;
>
> (D) any statement of the assumptions underlying or relating to any statement described in subparagraph (A), (B), or (C);
>
> (E) any report issued by an outside reviewer retained by an issuer, to the extent that the report assesses a forward-looking statement made by the issuer; or
>
> (F) a statement containing a projection or estimate of such other items as may be specified by rule or regulation of the Commission.
Notice the "OR" at the end of (E)?
POP QUIZ TIME! What does the "OR" mean?
ANSWER: that a forward-looking statement means any ONE of those items in the list, not ALL of them. A forward-looking statement can mean either (A) OR (B) OR (C) OR (D) OR (E) OR (F)
BUT WAIT, THERE'S MORE!
This is only the first half of the definition. Now we have to find the second half.
[SECTION 21E OF THE SECURITIES EXCHANGE ACT OF 1934](https://www.nyse.com/publicdocs/nyse/regulation/nyse/sea34.pdf)
Ok so what does Section 21E tell us? I screenshotted the section and added it here as images:
[21E 1/4](https://preview.redd.it/jm1ttr6lxfp61.jpg?width=460&format=pjpg&auto=webp&s=6e43417f0021fc8fe110c4f44e933875553a837c)
[21E 2/4](https://preview.redd.it/ksn9il5mxfp61.jpg?width=483&format=pjpg&auto=webp&s=d7a50e63de1163aaddc103265a2961859d9e5ecd)
[21E 3/4](https://preview.redd.it/zot5cxgnxfp61.jpg?width=473&format=pjpg&auto=webp&s=f67566501580614423344fdfdf5a3ac6a2e0e8a3)
[21E 4/4](https://preview.redd.it/oumtkpwoxfp61.jpg?width=492&format=pjpg&auto=webp&s=c3b47247b228c039fb145afba560017bab5270c3)
FEAR NOT! I'M HERE TO INTERPRET THIS LONG TEXT INTO 🦍🦍🦍 SPEAK!
Let's jump ahead to the definition first, and then we'll come back to look at the other sections.
The important part of Section 21E - Section I: DEFINITIONS
> (1) FORWARD-LOOKING STATEMENT: The term ''forward looking statement'' means
>
> (A) a statement containing a projection of revenues, income (including income loss), earnings (including earnings loss) per share, capital expenditures, dividends, capital structure, or other financial items;
>
> (B) a statement of the plans and objectives of management for future operations, including plans or objectives relating to the products or services of the issuer;
>
> (C) a statement of future economic performance, including any such statement contained in a discussion and analysis of financial condition by the management or in the results of operations included pursuant to the rules and regulations of the Commission;
>
> (D) any statement of the assumptions underlying or relating to any statement described in subparagraph (A), (B), or (C);
>
> (E) any report issued by an outside reviewer retained by an issuer, to the extent that the report assesses a forward-looking statement made by the issuer; or
>
> (F) a statement containing a projection or estimate of such other items as may be specified by rule or regulation of the Commission.
POP QUIZ: Notice anything?
ANSWER: The definition of "forward looking statement" is the same as the other statute!
Excellent! This makes things much easier (for now).
Translating Forward-looking statement from Legalese to 🦍🦍🦍 speak
There are apes with much more wrinkles when it comes to defining the specific terms as it relates to specific examples of the definition, but here are my main takeaways from the definition of "Forward-looking Statement"
1. This list is EXHAUSTIVE.
2. That means a forward-looking statement is only a forward-looking statement IF IT FITS into one of these definitions/categories.
Why do I personally come to this conclusion?
1. Because if this definition could include something that's NOT in this list, the first sentence would have to say that.
2. Possible examples of how the first sentence could do that (my additions in bold italics):
- The term ''forward-looking statement'' means***,*** *without limitation*-
- The term ''forward-looking statement'' means *,inter alia*- (*inter alia is fancy latin for saying "among other things" )*
- The term ''forward-looking statement'' means***, including but not limited to***-
Since we don't see that in the original sentence, I can conclude that the list they've provided are the only possible definitions.
Is reference to "short squeeze" a forward-looking statement?
Short answer: I strongly believe YES.
- I will explain that in more detail in Part 3, when we look at the rest of Gamestop's disclaimer
- But to answer quickly, it's forward-looking because Gamestop uses words like "MAY" in their 10-K filing.
Did Gamestop have to include a reference to "short squeeze" in their 10-k filing?
I currently believe the answer is "NO"
- I have not yet seen anything to prove otherwise
- I am also interested in digging deeper to see whether or not I'm correct on this assumption (because I only spent about 2-3 hours looking into this before I posted my first post)
- I will dive deeper into this question in Part 4
- If any apes with brains wrinklier than mine have an answer, please let me know!
Are the short-squeeze statements Gamestop made in their 10-K filing legally binding and can it be used against them in court?
Let's go back and review the other sections now, in 🦍 speak.
DISCLAIMER: I've looked at both sections and, unless my eyes are playing tricks on me, they appear to be exactly the same terminology. If I'm incorrect, please let me know.
🦍🦍🦍 Speak of the other relevant sections of 27A/21E:
- Section A - Applicability: this section applies to forward looking statements made by people who are required to do so, and items 1-4 outlines who is required to do so
- Section B - Exclusions: This section does not apply to forward looking statements made by the following people, and items 1-2 outlines who is excluded and why
- Section C - Safe Harbor: This is a doozy, but here we go:
- If you're trying to sue someone because of a statement they made that:
- is untrue; OR
- they forgot to include a material fact (in 🦍speak, "material fact" means "BIG/IMPORTANT FACT") and forgetting to include that material fact made the statement misleading;
- You can't sue them if the statement was a forward-looking statement AND:
- they identified it as a forward-looking statement; OR
- It's immaterial (in 🦍 speak, this means "not important"); OR
- You can't prove that the person who made that forward-looking statement was lying on purpose; OR
- You can't prove that the company that made the statement was approved by an executive officer (think C-level) AND the executive officer knew that the statement they were approving was false or misleading.
- This exclusion doesn't apply to people who fall under Section B (aka you can sue those people)
- Section D - Duty to update: Companies don't have to update their forward-looking statements if conditions change.
- Section G - The Commission can exempt any person or company from this section if they decide to do so.
- Section H - The commission basically has final say in what constitutes a "forward-looking statement" and can look at other rules, or change its own rules, when making that decision.
🦍🦍🦍Example of what we have translated:
- 🦍wants to sue a company because they allegedly said something misleading in their SEC statement.
- 🦍can't sue if:
- the misleading statement related to a forward looking statement and it was an honest mistake, or
- the mistake was small enough that it doesn't actually matter; or
- the commission decides to exclude that person/company from being sued
- But, if the person/company who made the statement falls under section B then they CAN be sued (examples of section B include someone who was convicted of a felony or misdemeanour in section 15 of the Securities Exchange Act).
- the company doesn't have to update its forward-looking statement after filing something, even if conditions change and 🦍 can't sue them for that
- Oh and by the way the Commission can decide what the rules are and change them at any time.
So what does this all mean? Can Gamestop be SUCCESSFULLY sued for making reference to a possible short squeeze that hasn't happened yet?
Short answer: I don't think so.
- Key word: SUCCESSFULLY. Of course they could be sued, but does that mean the person suing them would be successful?
- In my personal opinion, the laws we've looked at protect them.
- I will of course do a deeper dive into this but this is my current analysis.
OK so [u/luridess](https://www.reddit.com/u/luridess/) why the heck did you take me down this rabbit hole and what does this all mean?
SHORT ANSWER - I DON'T KNOW WHY GAMESTOP INCLUDED A REFERENCE TO A SHORT SQUEEZE IN THEIR 10-K SEC FILING, BUT I BELIEVE THAT THEY HAVE A VERY GOOD REASON FOR DOING SOMETHING THAT THEY DIDN'T HAVE TO DO.
There are many theories about why Gamestop included a reference they didn't have to, and there are lots of posts/comments about that and I will go through the comments in my last post to link to some in an update later tonight, but theories include, without limitation: (see what I did there?)
- GME's 10-K referenced that a short squeeze MAY happen based on events up to and including March 17, 2021. If you read between the lines, GME CONFIRMED on March 23, 2021 that a short squeeze HASN'T HAPPENED YET
- telling Apes that they know what's going on;
- Officially confirming that the STOCK WAS SHORTED OVER 100% at their fiscal year end, January 31, 2021
- One theory is that Gamestop included reference to a short squeeze to limit their own liability. While this is a possible theory, this doesn't seem to match up with the definition of "forward looking statement", especially the way that they define short-squeeze. But I will dive deeper into this particular topic in a different post.
- to be continued