From the Securities Lending Trading Desk

In the US, we’ve seen lending levels remain steady on Insys Therapeutics amid continued volatility. Chinese car manufacturer BYD Co Ltd.’s share price continued to decline last week as details emerged that a fraudster had been conducting business in its name. Whilst in Europe, Greenyard fell 37% following a plant closure due to a Listeria outbreak.

Below please find this week’s edition of From the Trading Desk, which provides timely commentary about top security earners, revenue drivers and other factors influencing the securities lending market from the BBH Securities Lending Trading Team.

Americas

Demand on Veritone Inc. (VERI) has eased on the heels of a secondary offering just one year after its IPO. Veritone filed a prospectus with the SEC to sell 1.7million additional shares to the public in an effort to supplement its current cash burn rate; the additional shares will dilute the current shares by about 10%. Nonetheless, the cloud-based AI technology company is still a top lending name as serious concerns exist around its ability to generate revenues that match its spending. Stock prices have been buoyed recently by positive sales news surrounding VERI’s new aiWare technology but this remains a company in a tenuous financial situation.

Lending levels have remained steady on Insys Therapeutics amid continued volatility. Insys has seen highs and lows between product development, federal indictments, and emerging cannabis markets. The developer of cancer support drugs won a minor victory in court last week as a judge in Boston declined to rule on a bribery indictment against billionaire owner John Kapoor and six other executives and managers accused of bribing doctors to prescribe their opioid drug Subsys. The trial is scheduled to commence in January if prosecutors can sufficiently clarify their indictment. In addition to Subsys, Insys is also developing a cannabis-based drug and is benefiting from the legal markets now open in California and Canada (along with Colorado, Nevada, and Washington). The sustained price volatility on this name has made it a consistent top lending target.

Asia Pacific

Chinese car manufacturer BYD Co Ltd.’s share price continued to decline last week as details emerged that a fraudster had been conducting business in its name. According to a company press release, a person claiming to act on behalf of the Shenzhen-based firm struck a series of deals with groups including Arsenal Football Club. BYD Co Ltd.’s share price has fallen by a third since the beginning of 2018 as the company struggled to find new clients, while shrinking subsidies have had a disproportionate impact relative to its competitors. We have seen strong lending demand for BYD Co Ltd.

NatureCell Co Ltd.’s share price plunged following news that its CEO had been arrested for market manipulation. CEO Ra Jeong Chan’s arrest caused shares in NatureCell Co Ltd to drop over 40% in a week. Shares in NatureCell had previously advanced 204% in the past 52 weeks, even as the KOSPI Index lost 5.2%. We saw moderate lending demand following the CEO’s arrest with demand subsiding as the share price stabilized.

Europe

Greenyard fell 37% following a plant closure due to a Listeria outbreak. Securities lending demand and been strong for Greenyard after the Brussels food distributor found bacteria that resulted in a deadly listeria outbreak and resulted in the closure of its plants in Hungary. Short interest as a percentage of free float has jumped 5% this week and fees have been increasing to reflect strong increase in demand. The estimated cost of recalling the frozen vegetables product and plant closures is estimated to be $35m.

Leonteq announced a capital increase to strengthen its capital base: shares selloff, borrow demand climbs. Leonteq AG shares slumped 14% after the Swiss investment firm announced a CHF 118mm rights issue and again omitted its dividend. Equity markets reacted unfavorably despite strong 1H results. Borrowers need stock to cover both directional and arbitrage demand. Shareholders are given the right to purchase 3 shares per each 16 held at CHF 41.50 per share. Rights will trade for 5 days beginning Tuesday and stock loan fees are expected to remain high in the short term.