From the Securities Lending Trading Desk

In the US, Sessions, who had been vehemently against marijuana legalization, announced his resignation on Wednesday. Shares in Toshiba Corp surged in Tokyo trading after it announced plans to reinstate its dividend and exit a troubled LNG investment. Potential M&A activity is heating up in the UK.

Americas

Cannabis stocks in North America remain in focus following gains after the US mid-term elections and the resignation of US Attorney General Jeff Sessions. After mid-term elections on Tuesday, Michigan approved legalizing recreational marijuana while Missouri and Utah both approved legalization of medical marijuana. The exit of Sessions and the election of more democrats in the House of Representatives are expected to bode well for cannabis stocks, as Dems are historically more in favor of cannabis legalization. Sessions, who had been vehemently against legalization, announced his resignation on Wednesday.  Tilray, Inc. (TLRY) went public back on 7/18 at $17 per share and rallied to an all-time high of $214.06 on 9/19. However, the stock had lost nearly half of its value and continued to trend lower until Wednesday when the price started to climb again. Additionally, we have seen fee levels trending higher for Net Element (NETE), Cronos Group Inc. (CRON), Aurora Cannabis Inc. (ACB) and Canopy Growth Corporation (WEED).

SunPower Corporation (SPWR) remains a long term focus of directional demand as the share price continues to fall despite turnaround efforts to refocus their most successful business unit, high-efficiency solar panels. SPWR has faced many headwinds over the years but chief among these has been tariffs. While the company now has an exemption, the roughly $100 million per year savings will not take effect until 2019 as they use up inventory purchased under the tariff. While 2019 isn’t far off, SPWR also has to contend with China’s cut of solar incentives in the second half of 2018. This resulted in the price of solar panels falling significantly and was felt throughout the industry, specifically by SunPower. Lastly, SPWR’s turnaround efforts will ultimately be seen in their ability to improve the balance sheet by reducing risk and leverage. However, investors remain skeptical as to whether or not they can ultimately become profitable.

Asia Pacific

Shares in Toshiba Corp surged in Tokyo trading after it announced plans to reinstate its dividend and exit a troubled LNG investment. Toshiba will pay EMM Ecological Holdings Co USD $806mm to take the rights to a US LNG export venture and limit Toshiba’s exposure to an investment that had the potential for multi billion dollar write-downs. The move capped off five years of profit losses from Toshiba’s investments in LNG and is the second Toshiba exit from a troubled energy business this year. Shares surged 12% before falling 3% the following day. We saw strong securities lending demand following the announcement.

One of Japan’s largest smartphone app developers announced that it has suspended its service for games after an apparent dispute with Apple Inc. Line Corp, a subsidiary of South Korean internet search giant Naver Corporation, announced that it halted the service for eight Quick Game titles for a month. Although the specific reasons for the suspension have not been released, the dispute may be in relation to Apple’s approval process for in-game purchases and the power they hold over app developers, an area that the Japanese government is currently reviewing for additional legislation. We have seen long-term securities lending demand for Line Corp whose shares have declined by 30% this year.

Europe

Potential M&A activity is heating up in the UK. Energy supplier SSE (SSE LN) fell nearly 5% late in the week, the most in two months, as reports suggested that a planned merger with Innogy SE may be delayed and require additional capital. SSE claimed that recently implemented price caps had threatened the financial viability of the deal in its current form. Sainsburys (SBRY LN) beat profit estimates this week as investors continued to monitor news of the merger between the supermarket chain and Walmart’s, Asda. A number of rivals and suppliers reported this week that the merger could reduce competition and result in higher prices for consumers. Short interest is at its lowest level since 2014.

Two rights issues started trading this week with a healthy demand for both. Aryzta AG the Swiss baker began trading on Wednesday opening with a positive spread where the rights plus subscription cost could be purchased for less than an ordinary share. Due to the high short interest in the name since the beginning of 2018 (circa 25% according to Markit) most lending supply was already on loan creating fee pressure this week. Kongsberg Gruppen ASA a Norwegian manufacturer of aerospace and defense products also began its rights trading period on Wednesday. Unlike the Swiss baker, Kongsberg has an oversubscription offer on their rights issues allowing participants to oversubscribe to additional rights not taken up during the trading period. The period is due to run until the 19th of November with much of the demand for this name based on the oversubscription option rather than potential spread between the rights and ordinary share price.