From the Securities Lending Trading Desk

In the US, YETI has been unable to sustain their IPO price of $18.00. In Asia, We have seen strong long term lending demand for Takeda Pharmaceutical Co. French firm, Vallourec, has been part of a number of oil industry suppliers who have suffered due to a recent downturn as producers cancelled and deferred projects.

Americas

JC Penney shares plummeted after reporting disappointing third quarter earnings as the company’s future remains in doubt ahead of the crucial holiday shopping season. The department store chain saw comparable sales fall 5.4% in the third quarter from a year earlier. That was far worse than the expected 0.8% decline analysts had estimated. The company also withdrew its annual earnings forecast sending shares to all-time lows. Much like out-of-business Sears, JCP has cut hundreds of jobs, with several years of reported losses, as they struggle to formulate a strategy to compete with online stores. The increased short interest in an already crowded short has caused fees-to-borrow to climb even higher.

Cooler maker, Yeti Holdings Inc. (YETI) remains a directional focus name after their IPO endured a chilly reception by investors as the share price fell 15% in the first two weeks of trading. Despite a recent rebound, YETI has been unable to sustain their IPO price of $18.00. This is in large part due to their release of disappointing financials. According to reports “Yeti’s 2017 net income and net sales dropped to about $15 million and $639 million, respectively, from $49 million and $819 million just a year earlier”. However, with the holidays fast approaching, YETI is optimistic that sales will rebound as shoppers stock up on items from beverage holders to backpacks. There is often strong directional demand for IPOs as investors question how the newly public company will fare and to date, YETI has not been an exception.

Asia Pacific

Shares in Samsung Group’s biopharmaceutical affiliate were suspended by regulators last week after authorities found that the group violated accounting rules. Samsung BioLogic, the world’s third-largest contract drugmaker with a market value of $19.5b billion, is under scrutiny by South Korea’s Securities & Futures Commission. Under investigation is the way it accounted for its 94.6 per cent stake in Samsung Bioepis, a joint venture with US pharmaceuticals firm Biogen. The news comes at a difficult time for the Samsung Group which has had its image dented in recent months over allegations of corruption and union sabotage. We have seen an increase in securities lending demand for Samsung Biologics, which has seen its share price decline by nearly 40% since the beginning over October.

Takeda Pharmaceutical Co announced a shareholder vote on 05 December to approve its $62 billion deal to acquire Shire Plc. The announced date is in advance of Takeda Pharmaceutical Co getting approval from the European Commission and a sign the company is confident they will pass the approval process. The deal is the largest in Takeda Pharmaceutical Co’s history and is expected to win shareholder approval despite the actions of a dissident group that own approximately 1% of the company. We have seen strong long term lending demand for Takeda Pharmaceutical Co.

Europe

Retail sales fell at their fastest rate over the past six months in October adding pressure to high street M&A. Demand for Intu properties (INTU LN) increased this week as further deterioration in the outlook of the British high street was reported and questions emerged regarding the commitment of the consortium bidding for a potential takeover. Intu announced, midweek, that it had requested an extension to the bidding process to either give the consortium bidding on the mall owner more time to announce a firm offer, or say that it does not intend to make a bid. Negative news was also compounded by news that beleaguered retail provider, House of Fraser, is set to close four stores within Intu malls citing a failure to agree new terms on rent. Though the stock has hit multiple lows this year, shares had initially increased up to 37% following the news of a new potential bid; however, this week’s news led to a drop of 7%. Lending demand remains high with short interest at 10%.

A strong finish for the year is nothing but a pipe dream for Vallourec holders. On Friday, the French provider of steel tubes to the oil and gas industry saw its shares plummet by up to 32% after reporting poor third quarter results. The firm, one of the most heavily shorted stocks in Europe with around 16% (Bloomberg) of shares out on loan, reported a negative cash flow for the period which saw outflows of $174 million. At the same time the yield on 400 million euros worth of five year Vallourec bonds spiked to 11.4% (Bloomberg). The French firm has been part of a number of oil industry suppliers who have suffered due to a recent downturn as producers cancelled and deferred projects.