US IPOs bring “eye-popping” equity borrow fees in Q3
08 October 2019 New York
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North American equity specials balances and fees were the “big story of Q3”, according to IHS Markit’s Samuel Pierson in the data provider’s quarterly market revenue report.
The upswing largely was largely due to initial public offerings (IPOs) and cannabis-related equities, the report explained.
Pierson specifically highlighted Beyond Meat, a US producer of plant-based meat substitutes, as having “undoubtedly been the outstanding security of the year in terms of revenue, with eye-popping fees paid by borrowers on what is now one of the largest US equity short positions in nominal terms”.
Total revenues for lending Beyond Meat shares are easily the highest for any security year-to-date, hitting $250 million, an impressive feat given the firm didn’t IPO until the first week of May, Pierson added.
Beyond Meat’s appeal means it has earned more than double the revenue from the next most popular stock, Canopy Growth, a cannabis company, that earned lender $107 million year-to-date.
According to IHS Markit data, the boost in specials-related revenue helped deliver $924 million in Q3 US equity lending revenue, the most for any quarter since Q3 2008’s $1.1 billion record.
The report noted that Q3 US equity returns narrowly edged out Q4 2015 and Q1 2016, which both had just over $900 million.
Total equity lending revenues came in at $2.1 billion, a 3 percent increase compared with Q3 2018. All the growth was in North America, with the rest of the world seeing a 13 percent decline in equity revenues.
North American equities delivered 42 percent of all securities lending revenues in Q3, the highest ratio since Q4 2015.
“Revenues for Q3 saw some growth year-over-year, as the increase in equity revenues in North America were enough to offset declines in most other regions and asset classes,” Pierson said.
Q3 lending revenue in a global context
The third quarter of 2019 is the first quarter of 2019 to deliver year-on-year (YoY) revenue growth, IHS Markit data revealed.
Global securities lending revenues for Q3 came in at $2.6 billion, marking a 5 percent increase above Q3 revenue in 2018.
The weighted average fee across all asset classes increased by 12 percent year-over-year while increasing fees supported the revenue growth, the 7 percent year-over-year decline in loan balances served as a drag on returns, the report added.
The upswing largely was largely due to initial public offerings (IPOs) and cannabis-related equities, the report explained.
Pierson specifically highlighted Beyond Meat, a US producer of plant-based meat substitutes, as having “undoubtedly been the outstanding security of the year in terms of revenue, with eye-popping fees paid by borrowers on what is now one of the largest US equity short positions in nominal terms”.
Total revenues for lending Beyond Meat shares are easily the highest for any security year-to-date, hitting $250 million, an impressive feat given the firm didn’t IPO until the first week of May, Pierson added.
Beyond Meat’s appeal means it has earned more than double the revenue from the next most popular stock, Canopy Growth, a cannabis company, that earned lender $107 million year-to-date.
According to IHS Markit data, the boost in specials-related revenue helped deliver $924 million in Q3 US equity lending revenue, the most for any quarter since Q3 2008’s $1.1 billion record.
The report noted that Q3 US equity returns narrowly edged out Q4 2015 and Q1 2016, which both had just over $900 million.
Total equity lending revenues came in at $2.1 billion, a 3 percent increase compared with Q3 2018. All the growth was in North America, with the rest of the world seeing a 13 percent decline in equity revenues.
North American equities delivered 42 percent of all securities lending revenues in Q3, the highest ratio since Q4 2015.
“Revenues for Q3 saw some growth year-over-year, as the increase in equity revenues in North America were enough to offset declines in most other regions and asset classes,” Pierson said.
Q3 lending revenue in a global context
The third quarter of 2019 is the first quarter of 2019 to deliver year-on-year (YoY) revenue growth, IHS Markit data revealed.
Global securities lending revenues for Q3 came in at $2.6 billion, marking a 5 percent increase above Q3 revenue in 2018.
The weighted average fee across all asset classes increased by 12 percent year-over-year while increasing fees supported the revenue growth, the 7 percent year-over-year decline in loan balances served as a drag on returns, the report added.
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