Why does one stock cost 0.3% to borrow and another 80%?

Borrow fees are not a scale of how bad a company is. They are a price for scarcity in a specific market — the market for lendable shares — and that market has its own supply and demand entirely separate from the stock's.

Two regimes with two names

General collateral (GC). Supply comfortably exceeds demand. Fees run from a few basis points to roughly 1% a year. The overwhelming majority of borrows in developed markets sit here, and the borrow cost is a rounding error in the position's economics.

Special, or hard-to-borrow. Demand has run into the limits of supply. Fees of 5%, 20%, 50% are all seen, and in extreme cases the annualised fee exceeds 100%. A stock does not need to be small or obscure to go special.

What actually causes a name to go special

• Small effective float. Shares held by founders, families, strategic partners or governments generally never enter lending programs. A company with 100 million shares outstanding and only 15 million genuinely lendable has a small supply pool regardless of its market cap.
• Crowded short demand. When many funds want the same borrow, the marginal lender sets the price.
• Convertible arbitrage hedging. A large convertible bond issue creates structural, sustained borrow demand from the bondholders hedging their equity delta (Unit 4 covers this).
• Corporate actions. Pending mergers, rights issues, spin-offs and dividend-related trades all create temporary bursts of demand.
• Recent IPOs. Lock-ups keep most shares out of lending pools for months. Newly listed names are often expensive to borrow purely for that reason, and often cheapen sharply after the lock-up expires and supply arrives.
• Index fund inventory already fully lent. When the natural lenders have nothing left, the price has nowhere to go but up.

What an expensive borrow costs in practice

On a $50,000 position, using annual fee ÷ 360 × market value:

Read the bottom row carefully. At a 100% annualised fee, the stock must fall roughly 8.3% every month just to pay the rent — before the position makes a single dollar. Over a year, the fee equals the entire value of the position. That is what "hard to borrow" means in cash terms.

Rates are not fixed, and that is the trap

An open borrow re-rates daily. A name that cost 2% on Monday can cost 40% on Friday if a wave of demand arrives or a large lender pulls inventory. The holder of an existing position has no say and no notice — the cost of a position you already own can multiply overnight, entirely independently of the share price.

This is why professionals treat the borrow rate as a separate, monitored risk with its own limits, not as a fixed transaction cost.

Reading it correctly

A high borrow fee tells you the lending market is tight. It does not tell you the company is bad, that the shorts are right, or that a squeeze is coming. It is information about supply and demand for a borrow, and nothing more. Treat it as one observable data point among many — never as a signal to act on.

Try it now

1. Below is one day of the IPO calendar, 22 January 2026: find BitGo (BTGO.US), priced that day, and read how many shares it sold in the offering.

2. Work out roughly when its lock-up would have expired (commonly 90–180 days after listing). The shares sold in the offering traded from the first day; the lock-up held back the rest. The company's share counts today are below: set the float beside the shares sold in January, and the difference is roughly what became freely transferable after listing.

3. Reason through what that supply arrival would do to the lending pool — and then to the borrow fee. You have just modelled the most predictable rate move in the securities lending market.