The high-profile “short-squeeze fireworks” centred on GameStop and other so-called ‘meme stocks’ favoured by retail investors last month made January the most-revenue-generating month for US equity finance on record, according to IHS Markit.
US equity revenues came in at $453 million for January, a 75 per cent year-on-year (YoY) increase, and an 11 per cent increase relative to December, explains IHS Markit securities finance analyst Sam Pierson.
The record-breaking start to the year, outdid previous highs of $407 million in December and $416 in June last year, and $410 million in September 2008.
The most-revenue-generating US equity in January was GameStop with $41 million generated largely as the result of the share price increasing 1,600 per cent over the course of the month. That wave appears to have crested in the first days of February, however, with the share price plunging from a year-to-date high of $347 on 27 January to bob just above $60 on 4 February.
The borrow fee did increase amid the volatility, Pierson notes, however it remained lower than peak fees observed around the proxy record date in 2020.
Despite GameStop-fever capturing the world’s attention the earnings don’t quite put it in the realm of other top earners from 2020 including Nikola and Quantumscape, a producer of lithium-ion batteries for electric cars, which both brought in stellar single-month earnings.
Current utilisation and borrow fee data also imply GameStop is unlikely to match the likes of Beyond Meat which in 2019 earned US lenders $65 million in September and $59 million in October.
Elsewhere, lenders posted strong returns in Europe as well, contributing to global securities lending revenues reaching $979 million in January, a 24 percent YoY increase and marking the fifth consecutive month of increasing YoY global returns.
European equity returns increased 19 per cent YoY for January, with $112 million in monthly revenue.
Only Asia Pacifc bucked the trend with equity finance revenues declining YoY in January, as they did for each month of 2020, but they did increase 5 per cent MoM.
Revenue was down in the two largest securities lending markets including South Korea, which only recorded revenues of $8 million in January, reflecting a 79 per cent YoY decline largely due to the recently extended short selling ban stifling demand to borrow.
