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Securities Lending Market Report | December 2023

US

>>> Equities

The headlines in US Equity and US corporate bond lending during this period include higher US interest rates, an inverted Fig 4 - DataLend
yield curve, and a handful of large concentrated special trades, with at least one stock achieving historically high lending
revenue. We saw little rotation of sectors that are in the crosshairs of short-side investors: electric vehicles, meme stocks,
crypto currency and biotech continued to house many of the top specials in the US throughout 2023. Special situations AMC Entertainment (AMC) SL Revenue 2023
remained a massive focus for both lenders and borrowers and rapidly rising US interest rates led to an increase in general
collateral lending for those lenders with cash reinvest programs able to support it. Last, but certainly not least, corporate 100
bonds proved to be an asset class that continued to improve its relevance in the securities lending space. 90
80
Special situation trades, known to some as corporate events, IPOs issuance had dried up in 2022 and first half of 2023, 70
dominated the US equity lending headlines in the latter half but that window reopened slightly in the year’s second half 60
of 2023; however, associated lending revenue came largely and remains open today. IPOs can trade special immediately Revenue (Millions $) 50
40
from just a few event-driven deals. Undoubtedly the year’s following the launch and/or a short base can grow over 30
most talked about trade was long AMC Entertainment (AMC many months and then lending fees will rise aggressively 20
US) / short AMC Preferred (APE US). After multiple delays heading into the IPO’s insider lock-up expiration date. Cava 10
in closing throughout H1 2023, the deal finally closed in the Group (CAVA) came to market last summer and traded at 0
middle of Q3 2023. Lending clients made upwards of $3 approximately 4% lending fee into the Fall before rising Jan 2023 Feb 2023 Mar 2023 Apr 2023 May 2023 Jun 2023 Jul 2023 Aug 2023 Sep 2023 Oct 2023 Nov 2023 Dec 2023
per share in 2023, with much of that revenue being paid out steadily into a December lock up expiration, at which point AMC (Mil)
upon the deal closing. Earnings of $3 per share compares few borrows approached 90% lending fees. The market
to a stock price of $3.39 in August when the deal closed enjoyed robust IPO issuance in Q4 with stocks like Arm
(pre 1:10 split). Prime brokers and lenders were certainly sad Holding (ARM US), Instacart (CART US), Birkenstock (BIRK
to see the AMC deal end, but knowing how much revenue US) and a few others. Unlike Cava, these stocks produced Fig 5 - DataLend
was generated for lenders, we can surmise that many deal modest lending revenue in Q4, but are poised have
arb hedge funds were thrilled to have AMC in the rear-view material impacts on revenue in 2024 when expiration dates Sirius XM (SIRI) SL Revenue H2 2023
mirror. Also in Q3 2023, Johnson & Johnson (JNJ) spun- approach. Between IPOs, mergers and conversion trades, it
off Kenvue (KVUE US) in a voluntary tender offer that the is fair to conclude that US Equity lending activity is trending
Street paid handsomely for guaranteed no sale, take no in the right direction led by various trade types in the special 50
45
action (TNA) elections. And then there is Sirius Satellite situation arena. 40
Radio (SIRI US), which was the most crowed US equity short 35
of the period. SIRI is merging with Liberty Media, but details 30
of the deal weren’t finalized until late in 2023. Lending fees Revenue (Millions $) 25
on SIRI will likely be top in the market in the first half of next 20
year as the deal should close mid-2024. Many other special 15
10
situations, with less lending revenue attached, either were 5
announced or closed in the period; VMWare (VMW US) 0
being bought by Broadcom (AVGO US) would be a good Jul 2023 Aug 2023 Sep 2023 Oct 2023 Nov 2023 Dec 2023
example. The Street almost unanimously believes this is a
harbinger of good things to come to Securities Finance in SIRI (Mil)
2024.