Pledged Share Stock Loans Increase Year on Year Allowing Clients To Access Better Stock Loan Financing Pledged share stock loan financing is more popular than ever as an alternative source of liquidity for significant shareholders in UK-listed companies. We explore the reasons why the market has reached new highs in the last two years – and what will drive its growth from here. Loans backed by pledged shares in UK-listed companies are taking off as a growing number of investors look to raise money from their shareholdings. Platinum Global are an institutional investment broker that specialises in long-term asset-backed financing. The number of equity-backed loans disclosed by directors of UK-listed companies more than doubled in 2020 compared with the previous year. Based on the trend observed so far in 2021, the transaction count is also on course to grow again in the full year, although the volume of loan proceeds raised may decline. Share pledges disclosed by directors in the year to August were worth over £412 million at the time the transactions were made public, compared with almost £2.4 billion in all of 2020. Using a typical industry loan-to-value (LTV) ratio of 65%, We calculate that these pledges translated into loans worth some £1.55 billion in 2020 and £269 million in the year to August 2021. Pledged Share Stock Loans These figures provide new insight into the evolution of share-backed financing, which is commonly referred to as Lombard lending in the UK. Market observers see it becoming increasingly broad-based, developing from a tool for high-net-worth individuals with billions of dollars of assets into an increasingly mainstream source of funding. Indeed, the more recent LSE data shows that share-backed financing is being used by a wider range of individual investors looking to raise smaller amounts of capital against shares in
Read more →Chinese tycoons Jack Ma and Joe Tsai have pledged part of their combined $35bn (£25bn) stake in Alibaba in exchange for large pledged share loans from investment banks. The share pledges, which were made to lenders including UBS, Credit Suisse and Goldman Sachs, were made by offshore companies that control half of the two billionaire’s stake in the eCommerce giant, which totaled 5.8 per cent in December. The amounts of the share pledges were not disclosed but the pair have repeatedly borrowed against their stock since Alibaba’s US listing in 2014, according to documents seen by the Financial Times. Share pledges allow banks to accept stock as collateral for loans but the borrower retains ownership of the shares. Ma and Tsai, who are Alibaba’s two largest shareholders, have used the loans to access vast fortunes tied up in shares. According to the report, Tsai’s Gulfstream 650ER private jet is mortgaged to Credit Suisse. The Swiss bank, which oversaw the company’s IPO, also lent to a shell company linked to Ma’s purchase of a mansion in Hong Kong and a new plane the same model as Tsai’s. Alibaba said Ma did not have any outstanding loans borrowed against its stock while Tsai’s outstanding loans were “easily manageable” with “prudent loan-to-value ratios to provide [a] substantial cushion against triggering a margin call”. The company added that share pledges were “ordinary financial planning to provide liquidity and diversification without having to sell shares in Alibaba”. Alibaba Group Holding Ltd.’s largest individual shareholders Jack Ma and Joe Tsai pledged parts of their combined $35 billion stake in the e-commerce giant in exchange for significant loans from banks, the Financial Times reported, citing company documents. The share pledges were made by offshore companies controlling more than half of the duo’s stake in Alibaba, which stood
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