From the Securities Lending Trading Desk

In the US, we are seeing investors sell off SONO amid growing concerns about the massive headwinds from competition from not only Amazon but also Apple and Google. In Asia, shares in KYB Corp fell in Tokyo trading after the hydraulic equipment manufacturer admitted falsifying quality control data for earthquake shock absorbers. Finally, in Europe, the plot thickened for Patisserie Valerie (CAKE LN) as news of previously unknown overdrafts surfaced and reports were released that the business could face a parliamentary investigation.

Americas

Demand for IPOs picked up this week with Livent Corp, (LTHM), Allogene Therapeutics, Inc. (ALLO), and Anaplan, Inc. (PLAN) all in focus. The strongest demand has been for Livent Corp, (LTHM), a lithium producer, which offered 20mm shares at a price of $17.00. Since going public, LTHM has been unable to sustain that value and remains a focus of demand. There was only mild broker demand for biotech Allogene Therapeutics, Inc. (ALLO) despite the price volatility over the past week. Shares were offered at $18.00 and quickly climbed to $26.96 on 10/15. Lastly, Anaplan, Inc. (PLAN), which offers business applications via the cloud, has also been in demand as the share price rallied from $17.00 to $25.43 on 10/17. In related news, Tencent Music Entertainment delayed their IPO until “at least November” amid recent market weakness. This has signaled to some analysts a possible slowdown in the rush of Chinese listings in the US.

Fee levels are easing for Sonos, Inc. (SONO) amid limited demand as the share price falls to a low of $12.57. SONO, which went public in August, rallied to a high of $21.69 on 8/22 but has been falling since then, taking their biggest hit last week amid reports that Amazon will be offering a host of new wireless speakers and accessories that will directly compete with Sonos’ products. Despite the fact that Sonos and Amazon are partnered through Alexa integration, AMZN has moved directly into the same space as SONO and AMZN is offering very similar products at vastly cheaper prices. We are seeing investors sell off SONO amid growing concerns about the massive headwinds from competition from not only Amazon but also Apple and Google.

Asia Pacific

Swiss elevator manufacturer Schindler Holdings has filed a lawsuit against South Korea over losses it has incurred from its shareholding of Hyundai Elevator. The lawsuit, which has been filed under the investment treaty in place between the EU and South Korea, alleges wrongdoing in relation to a number of rights issues by Hyundai Elevator between 2011 and 2014. Schindler, which is the largest single investor in the company, alleges that the deals destroyed shareholder value, diluted their own shareholding, and were merely a ploy to help the Hyundai Group’s chairwoman, Hyun Jeong-eun, to maintain control of the affiliate. We have seen long term securities lending demand for Hyundai Elevator which has seen its shares increase by over 80 per cent in 2018.

Shares in KYB Corp fell in Tokyo trading after the hydraulic equipment manufacturer admitted falsifying quality control data for earthquake shock absorbers. KYB Corp admitted to fabricating data used in buildings, cars and trains for over a decade. A total of 10,928 KYB Corp products used for building purposes were found to not meet government standards and have been used in 903 buildings across Japan. KYB shares fell sharply on the news and lost over 35% of their value. We saw moderate securities lending demand for KYB Corp following that announcement.

Europe

Another week of headlines for UK businesses as £1.6B is wiped off of Superdry and Convatec after profit warnings. Superdry (SDRY LN) shares fell 20% on Monday and have since dropped further to 27% down for the week as the clothing retailer released a profit warning suggesting that pretax profit estimates will be cut by 25%. The retailer blamed warm autumnal weather and poor FX hedging for the fall in expectations. Short interest spiked from 1.7% to 4.11% following the news. ConvaTec shares suffered a similar fate, falling 33% to a record low, as the medical equipment manufacturer warned that a change in client inventory policy could lead to a 5-7% reduction in earnings per share. Short interest has been gradually rising from 0.14% in June to 2.82% at present. Finally, the plot thickened for Patisserie Valerie (CAKE LN) as news of previously unknown overdrafts surfaced and reports were released that the business could face a parliamentary investigation. Last week CAKE raised £15M through the placing of shares purchased at £0.5 versus the last quoted price of £4.29 per share before the stock was suspended from trading on the 9th October.

Mergers and acquisitions round off the week. News emerged that Zegonda offered to boost its stake in Euskaltel (EKT SM) via a tender offer to 29.9% at a 18% premium led to an increase in the share price of 12%. At present there is no definitive timeframe on when the tender offer is due to take place but board approval is due in Q4 2018. Intu properties (INTU LN) rose 15% as news emerged that Brookfield Property Group offered a 44% premium takeover of the mall manager. The news comes months after a merger with rival Hammerson failed. Short interest remains high at 20% of free float. Lastly, rumors that a $ 46B merger between Linde (LIN GY) and Praxair (PX US) had been agreed by the Federal Trade Commission led to a 10% increase in LIN GY shares.