From the Securities Lending Trading Desk

In the US, Sirius XM Holdings Inc.(SIRI) agreed to buy online music service Pandora Media Inc. for $3.5 billion in an all-stock deal, creating the world’s largest audio-entertainment company. A Bloomberg Businessweek report alleged that Chinese spies exploited vulnerabilities in the U.S. technology supply chain to infiltrate networks in almost 30 U.S. companies, including Amazon and Apple, a major bank and government contractor. In Europe, Aston Martin Lagonda (AML OM) marked its return to listing on the London Stock Exchange with the second-worst first day stock move in Europe this year following launch on Wednesday after shares fell as much as 5%.

Americas

We have seen increased demand for Stitch Fix Inc., which made its IPO debut back in November 2017, as the share price continues its downward momentum, falling over 45% since hitting an all-time high back on 9/17. The online subscription fashion service reported mixed fourth-quarter earnings that showed revenue below Wall Street expectations as consumer growth slowed. However, its bottom-line result was better than expected. Analysts indicated that the company’s shares were priced for a better report than what was delivered. In the face of the recent uptick in SFIX bearish sentiment, fee levels have expanded in kind.

Sirius XM Holdings Inc.(SIRI) agreed to buy online music service Pandora Media Inc. for $3.5 billion in an all-stock deal, creating the world’s largest audio-entertainment company. The deal will help Sirius battle growing competition from streaming rivals Spotify and Apple Music. However, Sirius shares fell on the news as investors worry the company overpaid, thus drawing the attention of short sellers. Pandora has posted losses for at least the past eight quarters. The deal has spurred increased lending demand with borrowing fees tightening modestly as a result.

Asia Pacific

Chinese technology stocks fell sharply late last week after Bloomberg Businessweek reported that Beijing had hacked American computer networks. The report alleged that Chinese spies exploited vulnerabilities in the U.S. technology supply chain to infiltrate networks in almost 30 U.S. companies, including Amazon and Apple, a major bank and government contractor. Although the allegations have been strongly refuted by the Chinese government and the companies cited in the report, Chinese technology and software firms fell sharply on investor concerns that further negative news is likely in the near term. We have seen a gradual increase in securities lending demand in this sector in recent months, including shares of Hong Kong-listed shares of AAC Technologies, Lenovo Group, Xiaomi Corp and ZTE Corp.

US regulators may be lining up another hefty fine for Standard Chartered for further sanction breaches involving Iran-based clients of its Dubai branch. Bloomberg news reported last week that the London and Hong Kong-listed lender is potentially facing a fine of up to $1.5 billion as regulators delve into allegations that the bank continued to process US dollar transactions for Iranian controlled entities in Dubai even after it signed a deferred prosecution agreement and paid a fine of $667 million back in 2012 for similar infringements. We have seen moderate securities lending demand for Standard Chartered in recent weeks, whose HK-listed shares are down over 20% since the beginning of the year.

Europe

M&A activity continues to drive lending demand in the UK. Clydesdale Bank (CYBG LN) remains popular with borrowers who aim to increase their positions following approval this week by the FCA and PRA of a $2.3B takeover of Virgin Money. CYBG will issue shares to Virgin Money shareholders on October 15th. Shares initially rose 5% following news of the approval but have since declined to the lowest level in 15 weeks. The price is currently down 10% YTD. Short interest has decreased from 12% in September to 9% this week and 75% of lendable shares are currently on loan according to Markit. Intu properties (INTU LN) was also in demand late this week as news emerged that Brookfield Property Group and other major shareholders were planning a potential takeover/privatization bid, months after a merger with rival Hammerson failed. Though negative retail sector headlines have meant that the stock has hit multiple lows this year, shares increased up to 37% following the news. Short interest remains high at 12%.

IPOs have been a key focus in UK equity markets this week and have led to borrower demand. Funding Circle (FCH LN) launched a £1.5B listing last Friday at 440p only to see its share price drop 22% in a week to 340p. Though advisors to Funding Circle have blamed poor market liquidity and investor anxiety for the fall in share price, the business has so far been unprofitable due to revenue being reinvested into rapid expansion plans. Aston Martin Lagonda (AML OM) marked its return to listing on the London Stock Exchange with the second-worst first day stock move in Europe this year following launch on Wednesday after shares fell as much as 5%. Many investors and analysts dismissed the launch price as overvalued. Demand in both names has been high as borrowers look to take strategic positions.