From the Securities Lending Trading Desk

In the US, we have seen increased demand for DocuSign, Inc., as the share price continues its downward trend. Japanese real estate brokerage and management service firm Tateru Inc. has become embroiled in a falsification of data scandal, sending its share price into a tailspin. Rights issuance and convertible bond activity have been key drivers for securities lending demand in Europe.

Americas

Tilray Inc. (TLRY), a global leader in cannabis research, production, and distribution, remains a strong focus of directional demand as the share price has skyrocketed, soaring over 500% since making its IPO debut in July. The company became the first cannabis business in Canada to trade on a major U.S. stock exchange and recently received regulatory permits in Canada and Germany to export medical cannabis flower for distribution to German patients. However, bearish sentiment remains as some investors believe that the surge in stock prices industry-wide has made companies overvalued and a correction is imminent. For the second quarter the company reported revenue up 95% year over year to $9.74 million but the firm’s net loss for the period came in at $-12.8M, or -427%. One research firm suggested that with marijuana still illegal in the U.S at the federal level Tilray will be forced to tap into the secondary market in order to fund its own plan for expansion. Tilray is already an overcrowded short but recent recall pressure has caused fees-to-borrow to increase significantly.

We have seen increased demand for DocuSign, Inc., a provider of electronic signature solutions, as the share price continues its downward trend, falling roughly 20% since reaching a high back on 8/29. The company, which made its IPO debut back in April, recently announced a private placement offer of roughly 8mm shares and $400mm of convertible notes. Also, despite the company’s revenue climbing by 33% in the second quarter and increasing their outlook, it was not enough to satisfy Wall Street. DocuSign is expected to remain in focus as investors question if the high-flying IPO’s current valuation is warranted and sustainable.

Asia Pacific

Japanese real estate brokerage and management service firm Tateru Inc. has become embroiled in a falsification of data scandal, sending its share price into a tailspin. Earlier this month, the Nikkei newspaper reported that Tateru falsified documents when applying for loans at a local bank and made the accounts appear to be larger than they actually were. Executives at Tateru have since admitted that its employees carried out these malpractices to process the screening of loans in an expedited manner. Although the company has since apologized to customers and offered compensation, investors have taken a negative view on the company which is also under increased scrutiny for its financial reporting. We have seen strong securities lending demand for Tateru in recent weeks, which has seen its shares decline by over 65% since the beginning of September.

Japan’s largest messaging service provider announced last week that it would raise capital to fund an ambitious plan to expand its product offering. Line Corp said it would raise 148 billion yen ($1.33 billion) through the sale of convertible bonds to help fund its expansion into financial services and products powered by artificial intelligence. Line Corp, which has 164 million monthly active users across four key Asian countries of Indonesia, Japan, Taiwan and Thailand also said it plans to issue its own cryptocurrency token, Link, which it will use to reward users and developers for contributions to its services. We saw significant securities lending demand for Line Corp following the announcement of the capital raising.

Europe

Convertible bond activity has been key driver for securities lending demand. SGL Carbon successfully completed the placement of unsubordinated, unsecured convertible notes due 2023 (the “Convertible Notes”) in the aggregate principal amount of EUR 159.3 million. The Convertible Notes will have a maturity of 5 years until September 20, 2023 and will be issued and redeemed at 100% of their principal amount. SMCP announced the issuance of EUR 200M secured guaranteed bonds due 2021, which will be exchangeable into ordinary shares. Net proceeds from the new bonds will be used for general corporate purposes. Both names have seen increases in loan quantity since the news.

Rights issuance has been a key driver for demand this week. John Laing Environmental announced a rights issue totalling £50M through the issue of new ordinary shares at a price of 102p per share. The expected listing date is October 24. Swiss Prime Site also announced plans to issue just shy of 5M shares as part of a CHF330M capital increase. The subscription will work on the basis of 16 outstanding to 1 new share. Quantity on loan increased 50% (based on Markit data) following the news. Elementis released plans to launch a $230mm rights issue with a subscription price at 152p. Record date is October 1 for 1 new share per 4 outstanding. Quantity on loan has doubled since the news.