Liquidity, Free Float and Borrowing Capacity

In the context of securities-backed lending, liquidity refers to the ease and speed with which a lender could sell pledged shares in the open market without materially moving the price against itself. A highly liquid share — one traded in significant daily volume on a major exchange — can be realised quickly at or close to market price. A thinly traded share, even in a substantial company, may require days or weeks to liquidate in meaningful size, and attempting to do so rapidly could depress the price significantly. Lenders price this risk directly into the loan-to-value ratio: the less liquid the collateral, the lower the advance relative to market value, and the greater the discount built into the facility to absorb potential realisation risk.

Lenders translate liquidity and free-float assessments into loan-to-value ratios through a combination of quantitative screens and qualitative judgement. A blue-chip share with deep daily liquidity and a broad free float may attract an LTV at the higher end of the typical range — often sixty to seventy per cent of market value. A mid-cap share with moderate liquidity and a tighter float may attract an LTV in the forty to fifty-five per cent range. Shares with very low free float, limited daily volume, or listed on less liquid exchanges may fall outside lending parameters entirely, or require additional structural protections such as a lower LTV, a shorter tenor, or specific covenants. There is no universal formula; assessment is necessarily case-by-case.

Black Haven Investments conducts detailed liquidity and free-float analysis on every facility it considers, acting at all times as principal lender rather than as an intermediary. The analysis covers average daily volume over multiple time horizons, free-float data from company filings and exchange disclosures, any known insider lock-ups or regulatory restrictions on transfer, and the liquidity profile of comparable companies in the same sector and market. This work forms the foundation of the terms offered. Borrowers benefit from that rigour because it means the facility is genuinely priced to the risk of their specific collateral, rather than being a generic product applied indiscriminately.