Where finance and media intersect with reality

That Barclays ETN blunder keeps getting bigger

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ICYMI:

Here’s the Barclays filing presented with TBS highlights:

London, 29 April 2022Asdetailed in itsQ1 2022 results announcement, Barclays determined that it had issued securities in excess of the amount registered under the Barclays Bank PLC (BBPLC) US shelf registration statement.

I
n relation to this overissuanceand the associated impact, Barclays PLC(BPLC)is preparing an amendment to its Annual Report on Form 20F for the year ended 31 December 2021 (the BPLC 2021 Form 20F). This
amendment will reflect the change in management’s assessment of BPLC’s internal control over financial
reporting and KPMG’s auditor attestation thereon aswell as its disclosure controls and procedures.

BarclaysvBank PLC is preparing an amendment to its Annual Report on Form 20F for the year ended 31 December 2021 (the BBPLC 2021 Form 20F) to include its restated 2021 financial statements and to reflect the change in management’s assessment of internal control over financial reporting and disclosure controls and procedures.

These amendments will be filed as soon as practicable. Until the BPLC 2021 Form 20F has been amended to disclose that its internal controls were not effective, KPMG’s audit report should not be relied upon by users of
BPLC’s financial statements. Until BBPLC has restated its financial statements for the year ended 31 December
2021 and amended the BBPLC 2021 Form 20F, investors and other users of BBPLC’s filings with the US
Securities and Exchange Commission are cautioned not to rely on the financial statements included in the BBPLC

2021 Form 20
F.


As a result, Barclays has suspended its market making activities of BPLC and BBPLC debt
securities at this time. Barclays will continue to evaluate the extent to which it can resume market making in any such individual
security.

More info from the Q1:

Financial Statements in BPLC 2021 ARA: The directors do not believe it is appropriate under UK company law and financial reporting standards to revise the financial statements of Barclays PLC (BPLC) included in its 2021 Annual Report and Accounts (BPLC 2021 ARA) to reflect the impact of the over-issuance, but Barclays will instead record a pre-tax
provision of £220m (£170m post-tax) as at 31 December 2021 as a prior year adjustment in the financial statements of BPLC for the year ended 31 December 2022 in relation to these matters. This and subsequent results announcements will therefore also reflect the impact of this adjustment in the appropriate prior year quarters.

Separately, I’m reading Dr. Susanne Trimbath’s Naked, Short and Greedy regarding her decades-long quest to shine a light on Wall Street’s fails-to-deliver problem. Trimbath’s big claim is that all three practices (fails-to-deliver, naked short selling and stock borrowing) have the effect of doubling each share traded. The consequences are more shares in circulation than the company has issued. A.k.a over-issuance.

As she puts it:

Another way that what we are talking about in this documentary that relates to the financial problems we are seeing now is that if you understand this idea that more shares are being sold than exist then it’s important to recognize that for Fannie Mae and Freddie Mac multiples of outstanding bonds have already been sold, pushing down the price and doing these other sorts of damages to the companies.

She goes on to tell this anecdote:

I was at a securities lending conference on Monday and I made a presentation on the corporate governance implications of securities lending which is directly what we are talking about here today. An interesting fact that someone brought out was that at their last annual meeting, Bank of America received 130% in votes: they received 30% more votes than they had shares outstanding. That’s just the number of people who actually voted their shares! You can imagine how many shares were sold beyond what they actually authorized and issued. If you think that you can sell 30% more shares than exist and not have a direct impact, not only on the share price but also directly on the company, then just look at what’s happening to banks right now. That’s the impact that happens.

I should stress I haven’t corroborated this fact about the Bank of America voting ratio. But it did remind me of the fact that one of the most failed-to-deliver stocks for a long time was the XRT retail ETF. It was also one of the most heavily shorted ETFs in the market.

It only just occurred to me recently that one of its top holdings is GameStop.

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