ADT Inc. provides security systems and services. The Boca Raton, FL-based company has a market capitalization of $6.6B and 19,000 employees. After an uninspiring H1 2019, shares have outperformed the broader market, rising from a $4-handle in August 2019 to more than $9 now. Short Interest is about 10% lower than last summer but lenders are still able to charge more for borrow. The borrow fee rose from single-digits to 30% today. Dislocations like this may happen when more shares are removed from the lending market than shorts covering.
Prime brokers can rehypothecate securities with a market value up to 140% of the debit balance. Stock can become unlendable if the debit balance is removed or if the prime broker chooses to rehypothecate other assets. Participants in fully-paid lending programs, whether institutional or retail, always have the option to discontinue lending. We see evidence of tightening with utilization at 97%. This morning we were asked by 5 counterparties to lend to them. We had an inventory show from one large retail broker, as well.
Disclosure: Interactive Brokers
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