Borrow demand for equities with pre-IPO lockups expiring has helped drive January global lending revenue to $789 million, says IHS Markit.
Shares in the fitness equipment producer Peloton and teledentistry company SmileDirectClub were among the most sought after according to the UK data analytics firm in its monthly report, in a trend that first emerged last year.
Shares of Peloton generated $21 million in revenue, while SmileDirectClub generated $5.6 million, combing to deliver 10 percent of the January US equity total of $258 million.
Another January stand out according to the report, was Tanger Factory Outlet, which generated just over $13 million in revenue in the month – largely due to volatility in shares available for borrowing.
Another trend that’s carried over from last year was a demand to borrow cannabis-related equity.
Lending fees for this sector accounted for 15 percent of North American equity revenues in January, up from 13 percent in Q4 2019.
Overall, revenues declined 2.5 percent compared with December, however, most of the drop-off was the result of not having an event like the Danaher exchange offer, says IHS Markit.
But, a month-over-month comparison shows that securities lending revenue has stolen a march on 2019’s figures, with last month’s revenue figures outperforming January 2019 when markets were emerging from the Q4 2018 sell-off.
Elsewhere, global corporate bond revenues remained below the early 2018 peak, although new ways of generating revenues by lending credit instruments are still emerging. Corporate bond lending revenues came in at $42.1 million for January, a decline of 0.8 percent compared with December 2019.
The report’s author Sam Pierson, director, securities finance, at IHS Markit, notes: “So far so good for 2020, though an exchange offer certainly wouldn't hurt!”
Writing for SLT in May 2019, Pierson explained that exchange offers reflect the key role that securities lending plays in the plumbing of global financial markets.
“This corporate action type is also a boon to the securities lending industry itself, driving significant loan balances and fees,” he said.
