Monday, February 8, 2021

Tomorrow In Securities Regulation: Investors

I tell my students that the participants in securities transactions are "the three Is" or  "I3": issuers, intermediaries, and investors.  Tomorrow morning, having covered the definition of a security and the concept of materiality, I offer some foundational words on investors. 

What to tell?  Of course, I will talk a bit about investment theory, the investor protection policy and mechanisms of federal securities law, the composition/demographics of the typical equity ownership of a public company, etc.  But what do I say about GameStop Corp.?  Set forth below is a chart summarizing the trading in GameStop common stock for the past five days: (courtesy of Google Finance):

Screen Shot 2021-02-08 at 11.54.19 PM

Who are the investors in the market for GameStop common stock, options, and short positions now?  Who will they be in a month or six months or a year (assuming a trading market can be sustained)?  And what do the changes in GameStop's investor profile say about the firm itself, about the New York Stock Exchange, and about various related aspects of securities regulation?  

There remain few answers to the fundamental question of who owns or is trading in GameStop's publicly traded common stock.  Nevertheless, there are many worthy conversation starters around the GameStop phenomenon that raise interesting opportunities for longer-term exploration.  More on all this as time marches on.  "Once more unto the breach, dear friends, once more . . . ."

[Editorial note (2/9/2021): I should have mentioned that I do plan to use John Anderson's post from Saturday (which echos points he made in our UT Law roundtable last week) to talk about whether some of the people he mentions or alludes to (thrill-seekers, political speech purveyors, trading gamers, populist performers, nostalgic market-watchers) are or should be considered to be investors.]

Joan Heminway, Securities Regulation, Teaching | Permalink


Looking forward to your insights.

Posted by: Tom N. | Feb 9, 2021 12:52:40 PM

Tom N., this was all new information to the students. We all are processing this information, still. General market information about the demography of retail investors hints at who may have been involved in the GameStop run-up. But there are no easy answers. As I have suggested in other forums, congressional hearings (if properly engaged) may turn up more answers.

And we have left open the question of who the "reasonable investor" is--the investor protected from fraud and many misstatements through the use of the TSC/Basic materiality standard. I wrote about that from a gender perspective a number of years ago (, but securities trading markets operated differently back then. Day trading, algorithmic trading, and the like have changed the securities markets measurably . . . .

Posted by: joanheminway | Feb 14, 2021 11:21:34 AM

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