From the Securities Lending Trading Desk

In the US, one industry expert stated that Ballard has a long way to go before it can proclaim success in proving the fuel-cell business can be profitable. In Asia, we have seen moderate securities lending demand for Cathay Pacific since the revelation of the hack, with its shares down 16% in 2018 and now trading at a low not seen since June 2009. In Europe, problems are compounding for Spanish supermarket chain Distribuidora.

Americas

US tech benchmark Nasdaq index enters correction territory, after falling 12% from its August all-time high. Hedge funds have positioned for a sell-off as loan balances climbed for tech and semiconductors since early September. Analysts have commented that investors are growing weary that outsized profit gains are unsustainable. Names that have been in focus and have seen borrowing cost rise as a result include: Park City Group (PCYG), Vuzix Corp (VUZI), and Veritone Inc. (VERI), to name a few.

Demand increases for fuel cell developer Ballard Power System Inc. (BLDP). Ballard Power shares have fallen 23% since hitting a six-month high on 9/20. Analysts have pointed out the company has failed to generate a positive operational cash flow. One industry expert stated that Ballard has a long way to go before it can proclaim success in proving the fuel-cell business can be profitable. Adding to the recent demand has been market recall pressure which combined with rising short interest has driven up fees to borrow.

Asia Pacific

Shares in Celltrion Inc plunged after a major shareholder reduced its stake. The Korean pharmaceutical firm fell sharply last week after Ion Investments BV, a subsidiary of Singapore investment firm Temasek Holdings, raised $793 million by partially divesting its stake in Celltrion. Singapore-government owned Temasek stated that the sale was not related to Celltrion’s fundamentals and that the two companies will continue their strong partnership through its existing stakes in both Celltrion Inc and Celltrion Healthcare. We have seen strong long-term securities lending demand for both Celltrion Inc and Celltrion Healthcare.

Shares in one of Asia’s leading airlines fell sharply late last week after it revealed that a hacker gained access to sensitive passenger information. Cathay Pacific Airways reported that the hack, which was detected in March this year, was a result of someone gaining unauthorized access to data including passport numbers, contact details and travel histories. The airline is facing criticism for not going public with the information as soon as they identified the issue and has engaged consultants as well as a leading cyber security firm to help strengthen its IT security protocols. We have seen moderate securities lending demand for Cathay Pacific since the revelation of the hack, with its shares down 16% in 2018 and now trading at a low not seen since June 2009.

Europe

Spanish supermarket chain Distribuidora’s debt rating cut to junk, short bets pay off. Spanish supermarket chain Distribuidora’s debt rating cut to junk, short bets pay off. Problems are compounding for Distribuidora after the firm announced it may restate 2017 earnings, issued profit warning, cut its dividend, fired the finance head, and its chairman resigned. Markets punished the company as shares sold off 68%, down 86% from its 2017 high. Yields on Distribuidora bonds due July 2019 reached 57% on Thursday, after ratings downgrades prompted forced selling. Stock borrow fees traded at elevated levels this week before tapering, as market recalls were satisfied. Funds have pared short positions and taken profit off the table, but many are expected to hang in the trade as there’s potential for another ratings cut and possible default due to short term liquidity concerns.

Minor’s bid for NHH Hotel accepted by 48% of share capital. The Tender offer period closed this week with healthy bids for guaranteed untendered stock. Minor entered into an agreement to acquire from HNA Group a 25.2% stake of NH Hotel Group in two transactions, one for 16.8% at EUR 6.4 per share and the other for 8.4% at EUR 6.10 per share. Afterwards Minor launched a tender offer for the remaining 65.3% of the company it does not own at EUR 6.4 per share. This week the stock has been downgraded and is trading at the lowest levels in five months.