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Short-selling start-up for ordinary investors raises $12m

Matthew Field
Sharegain says it will open up securities lending - AP

A start-up that hopes to turn the investment banking business of securities loans into an everyday activity has raised $12m (£9m) from investors.

Sharegain, a start-up based in Israel and London, hopes to make securities lending, a practice common among big banks for betting against companies by "shorting" them, easier for ordinary savers.

The start-up's new funding comes from investors Blumberg Capital, Target Global, Maverick Ventures Israel and Rhodium, adding $5m to its current cash pile.

Securities lending is a $2.5 trillion industry, with banks lending securities to each other to secure profits.

"We can't do this as private investors," said Sharegain chief executive Boaz Yaari. "We had to think how do we develop a platform that can benefit users like the banks have been benefiting for decades."

For now, Sharegain's online service is limited to smaller account managers and private family offices, although according to Mr Yaari these previously would have had to turn to investment banks for their securities lending. The start-up has offices in Israel for its technical staff and London for its capital markets experts.

"We want to be working with everyone," Mr Yaari said, "so an ordinary investor can go into his or her stockbroker and can look at making their shares available for lending."

In the US, securities lending has been the subject of antitrust litigation against incumbents Goldman Sachs and JP Morgan Chase. Investors allege the banks sought to stifle competition in the market since 2009 in order to keep the stock lending market "in the stone age" by boycotting start-ups.

In a 93-page decision, a US judge ruled there was "direct evidence" of a conspiracy. The banks have denied the claims.